TORONTO: The Canadian dollar stabilized against its US counterpart on Monday, but only after tumbling to a fresh 12-year low as crude oil prices remained fragile and the market braced for a potential rate cut on Wednesday from the Bank of Canada.
The currency fell 2.5 percent last week, with the sell-off for the risk-sensitive commodity currency gaining additional traction on Friday as Wall Street tumbled to its lowest level since October 2014.
Oil prices hit their lowest level since 2003 as the market braced for additional Iranian exports after the lifting of sanctions against the country over the weekend.
US crude prices were down 1.16 percent to $29.08 a barrel, while Brent crude lost 0.69 percent to $28.74.
The implied probability of a Bank of Canada rate cut on Wednesday was 64 percent, little changed from Friday. The market has fully discounted a rate cut by April and it has implied a one-third chance of an additional rate cut by the end of the year.
However, some economists believe that the Canadian dollar's sharp fall may forestall a rate cut.
At 9:20 a.m. EST (1420 GMT), the Canadian dollar was trading at C$1.4530 to the greenback, or 68.82 US cents, matching the Bank of Canada's official close on Friday.
The currency's strongest level of the session was C$1.4487, while it hit its weakest level since April 2003 at C$1.4650.
Canadian government bond prices were mixed across the maturity curve, mostly trading in a narrow range with US markets closed for the Martin Luther King Day holiday.
The two-year price was down 0.5 Canadian cent to yield 0.29 percent and the benchmark 10-year rose 6 Canadian cents to yield 1.145 percent. The 10-year yield hit a new record low on Friday at 1.143 percent.
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