TORONTO: The Canadian dollar weakened slightly against the US dollar on Tuesday as crude prices extended their sharp losses on deepening concern about excess supply around the world.
Canada is a major exporter of oil, and its currency has been hit hard as crude prices have tanked more than 50 percent over the past six months. They hit fresh 5-1/2 year lows this week as Saudi Arabia cut selling prices to Europe and major producers showed no signs of scaling back production despite the supply glut. US prices fell below $49 a barrel on Tuesday.
The Canadian dollar, which lost 8.6 percent last year largely due to the plunge in oil, was trading at C$1.1785 to the greenback, or 84.85 US cents, weaker than Monday's Bank of Canada close of C$1.1749, or 85.11 US cents.
The loonie was also underperforming most other major currencies.
"You could argue in the context of the price movements that we've been seeing over the last 24 hours or so, that the currency has held in comparatively well. But there's still a residual bid underpinning the market," said Jeremy Stretch, head of foreign exchange strategy at CIBC World Markets in London.
Stretch said the loonie could retreat as far as C$1.1950 to the greenback in the very near term as investors cast their eye toward key economic data this week, including Canada's trade balance for November, which is due on Tuesday, and Canadian and US employment data for December on Friday.
Canadian government bond prices were higher across the maturity curve, with the two-year up 3 Canadian cents to yield 0.966 percent and the benchmark 10-year climbing 29 Canadian cents to yield 1.657 percent.
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