TORONTO: The Canadian dollar was within striking distance of C$1.16 against the greenback on Friday as it hit fresh 5-1/2 year lows on new worries over a supply glut in the oil market spurred by an International Energy Agency report.
The agency, which coordinates the energy policies of industrialized countries, forecast an increase in global supplies next year but cut its outlook for global oil demand by 230,000 barrels per day.
Canada is a major oil exporter and the currency's sensitivity to crude prices has magnified as the prices have plunged to 5-1/2 year lows since June. Canada's main stock index, home to a hefty number of oil and gas producers, has dived about 10 percent this week.
"Generally, it's just ongoing pressure with oil prices still moving more, equities lower and risk aversion higher, and none of it is feeding particularly well into the Canadian dollar outlook," said Camilla Sutton, chief currency strategist at Scotiabank.
"We haven't been at these levels in over five years, so it starts to make the whole numbers pretty important, like C$1.16, C$1.17."
At 9:17 a.m. (1419 GMT), the Canadian dollar was at C$1.1558 to the greenback, or 86.52 US cents, after touching C$1.1591, or 86.27 US cents earlier in the session, its weakest level since July 13, 2009. It finished at C$1.1527, or 86.75 US cents on Thursday.
Next week, Canada will release a slew of top-tier economic data, including manufacturing sales, wholesale trade, retail sales for October, and November inflation figures. The US Federal Reserve will also meet to make its next policy decision.
"So we'll have a really good update on how the economic outlook is unfolding," Sutton said.
Canadian government bond prices were higher across the maturity curve, with the two-year adding 5.5 Canadian cents to yield 0.990 percent and the benchmark 10-year rising 33 Canadian cents to yield 1.790 percent.
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