TORONTO: The Canadian dollar was broadly weaker against all its key counterparts on Monday and closed at its weakest level in more than five years against the US dollar as crude prices tumbled to multi-year lows.
Oil slumped 4 percent in one of its biggest declines this year on market expectations of deeper price cuts next year and after the chief executive of Kuwait's national oil company said prices were likely to remain around $65 a barrel for the next six to seven months.
Canada is a major exporter of oil. The impact of crude prices was also felt on the Toronto Stock Exchange, where the energy subgroup nose-dived 6.5 percent.
"The Canadian dollar decline to start the week was entirely driven by oil weakness as the post-OPEC lows give way," said Adam Button, currency analyst at ForexLive in Montreal.
"Money is flooding out of Canada and out of the tar sands. At this point, a fear trade has gripped the oil and gas industry and Canada is a very easy target any time there's trouble in oil."
The Canadian dollar finished at C$1.1482 to the US dollar, or 87.09 US cents, its weakest close since July 13, 2009. The currency had ended at C$1.1432, or 87.47 US cents, on Friday.
Button said the Canadian dollar's retreat could accelerate rapidly if the currency breaks above the C$1.15 level and said a more dramatic decline was averted on Monday by some large sell orders that protected that level.
CIBC said in a research note on Monday that it expects the Canadian dollar to hit C$1.23, or 81 US cents, by the third quarter of 2015.
The Canadian dollar was already under pressure from a rallying greenback following Friday's US labor market data, which showed strength in both wage growth and job creation in the United States.
In Canada, the employment figures did little to convince market participants the Bank of Canada will be changing its tune on monetary policy any time soon.
The loonie saw little reaction to economic data on Monday that showed Canadian building permits edged higher in October following sharp gains in September, and housing starts climbed in November.
Canadian government bond prices were higher across the maturity curve, with the two-year adding 4.5 Canadian cents to yield 1.025 percent and the benchmark 10-year jumping 55 Canadian cents to yield 1.895 percent.
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