TORONTO: The Canadian dollar fell through C$1.16 to its weakest level against the US dollar in 5-1/2 years on Monday as crude prices hit multiyear lows after OPEC stayed resolute on its production stance.
The Organization of the Petroleum Exporting Countries reaffirmed on Sunday its intention not to cut output despite a global fuel glut, while the United Arab Emirates said later there was no need for an emergency OPEC meeting to fix prices.
Canada is a major exporter of crude and the loonie's fortunes have tracked those of the oil price since it started dropping in June. The Canadian currency has fallen nearly 10 percent over a similar period to levels not seen since early July 2009.
"We're focusing all energy, pardon the pun, on crude. That's really what's been moving the market," said Amo Sahota, director at Klarity FX in San Francisco. "It does look as though it's reaching some over-extension from a technical perspective, but fundamentally, nothing's changed."
The Canadian dollar ended Monday's session at C$1.1656 to the greenback, or 85.79 US cents, sharply lower than Friday's finish of C$1.1572, or 86.42 US cents. It was its weakest close since July 8, 2009.
"Last week, we saw Canada begin to post losses against some of the other majors (currencies) and that was for the first time in quite some time," said Brad Schruder, director, foreign exchange sales, at BMO Capital Markets.
"If you need to buy US dollars you most certainly need to err on the side of caution in these last couple of weeks of the year because the storm is upon us."
Schruder said it would not be surprising to see USD/CAD hovering near C$1.20, but added that would likely be a story for January, not December.
All eyes will be on the US Federal Reserve on Wednesday to see how oil's retreat fits into the central bank's decision-making.
A slew of Canadian economic data, including inflation figures for November on Friday, will also be in focus, but Schruder said that given the influence of oil prices, the figures will be heavily discounted by the market.
Canadian government bond prices were mixed across the maturity curve with shorter-term treasury bills higher and longer-term bonds lower. The two-year edged down 2.5 Canadian cents to yield 0.976 percent and the benchmark 10-year fell 24 Canadian cents to yield 1.783 percent.
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