TORONTO: The Canadian dollar touched a fresh five-year low against its US counterpart on Wednesday as falling crude oil prices pulled the currency to a fourth day of sharp losses.
The loonie, as Canada's currency is colloquially known, is sensitive to commodity prices due to the large portion of the economy dependant on resource extraction and production.
"The principal factor that's been driving it in the last two or three sessions has been the sharp move down in crude prices," said Adam Cole, global head of foreign exchange strategy at RBC Capital Markets in London.
He pointed out that the fall in the Canadian currency was being echoed by a drop in the Norwegian krone, another resource-reliant currency.
Weak economic data from China and Europe kept the pressure on crude prices, which have fallen by more than a third since June, and Cole said it was difficult to predict how much further they could fall.
"I wouldn't like to try to draw a line under crude prices," he said.
The Canadian dollar was last trading at C$1.1438 to the greenback, or 87.43 US cents, weaker than Tuesday's close of C$1.1410, or 87.64 US cents.
At one point it hit C$1.1466, its weakest level since July 2009. It has fallen about 7 percent this year, mostly due to falling commodity prices.
A Reuters poll released on Wednesday showed that currency strategists expect low oil prices and a tighter monetary policy from the US Federal Reserve to weigh heavily on the loonie in the coming year.
The US currency was also boosted by a sweeping win for Republicans in midterm congressional elections.
Canadian government bond prices were lower across the maturity curve, with the two-year down 3 Canadian cents to yield 0.997 percent and the benchmark 10-year was down 18 Canadian cents to yield 2.046 percent.
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