Home >> Americas >> Oil's drop, greenback rally pull C$ to 5-1/2 year lows

imageTORONTO: The Canadian dollar extended its new year losses against the US dollar on Monday, retreating to new 5-1/2 year lows as oil prices sank further and the greenback's rally showed no sign of abetting.

The US dollar surged broadly, spurred by expectations of monetary policy easing in the euro zone and by rising political concerns in Europe ahead of elections in Greece, which pushed the euro to its lowest level since early 2006.

US crude prices slid closer to the $50 mark as worries over soft demand and excess global supply continued to drag on the market. Canada is a major crude exporter and the Canadian dollar has been hit hard by plunging oil prices.

“It's really being pulled around by the US dollar and crude prices,” said Adam Cole, global head of FX strategy at RBC Capital Markets in London.

“CAD is doing much better on the crosses versus the US dollar, however, which is an entirely normal phenomenon… CAD is holding up pretty well.”

The Canadian dollar, which was stronger against nearly every major currency except the US dollar and the Japanese yen, was trading at C$1.1785 to the greenback, or 84.85 US cents, weaker than Friday's Bank of Canada close of C$1.1762, or 85.02 US cents.

At one point during the session, the loonie touched C$1.1843, or 84.44 US cents, its weakest level since May 4, 2009, extending Friday's more than 1 percent plunge.

The currency is unlikely to see further dramatic moves in the near term, Cole said, with markets awaiting key economic data later in the week, including employment reports for December from Canada and the United States on Friday.

Canadian government bond prices were higher across the maturity curve, with the two-year rising half a Canadian cent to yield 0.998 percent and the benchmark 10-year climbing 20 Canadian cents to yield 1.721 percent.

Copyright Reuters, 2014

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