TORONTO: The Canadian dollar weakened against the greenback on Thursday as oil prices sold off and the currency tested a break through strong technical resistance at C$1.10 for a third day in a row.
Data that showed new home prices in Canada were unchanged in July elicited little reaction from the loonie, though the mostly second tier domestic data on offer this week had not been expected to drive the currency significantly.
The loonie has shed about 1 percent so far this week as markets have been focused on trying to gauge when the US Federal Reserve might start to raise interest rates.
Heading into next week's Fed meeting, speculation has increased that a rate hike could come sooner than markets have been anticipating, which would benefit the greenback to the detriment of the loonie.
"There's a growing consensus that (the Fed) might alter the forward guidance to remove the 'considerable time' phrasing around when they're going to start tightening after they're done tapering," said Bipan Rai, director of foreign exchange strategy at CIBC World Markets in Toronto.
The loonie was also weighed on by lower oil prices as Brent crude dropped to a two-year low below $97 a barrel.
The Canadian dollar was at C$1.1003 to the greenback, or 90.88 US cents, weaker than Wednesday's close of C$1.0935, or 91.45 US cents.
It touched a session low of C$1.1021. Thursday is the third day in a row the currency has pierced C$1.10, but so far it has been unable to close at that weaker level.
A close above C$1.10 could spell further gains for the greenback against the loonie, with the C$1.1050 to C$1.1053 range the next big level to watch, Rai said.
"We do see some weakness ahead in the next couple of months, but we don't think we're going to get beyond this year's lows for the Canadian dollar," he said.
Canadian government bond prices were higher across the maturity curve, with the two-year up 3 Canadian cents to yield 1.138 percent and the benchmark 10-year up 27 Canadian cents to yield 2.176 percent.
Comments
Comments are closed for this article.