TORONTO: The Canadian dollar was trading at levels not seen in nearly six years against its US counterpart on Thursday, extending losses from the previous session after the Federal Reserve maintained its view that US interest rates could rise this year.
Diverging monetary policies between the Fed and the Bank of Canada, highlighted by last week's shock rate cut in Canada and the Fed's upbeat outlook on Wednesday, have firmly pushed the Canadian dollar onto a weaker path. Markets are currently pricing in about a 57 percent probability of another interest rate cut by the Bank of Canada in March.
"These factors suggest the Canadian dollar is unlikely to recover any significant strength anytime soon," said Shaun Osborne, chief currency strategist at TD Securities.
The Canadian dollar was trading at C$1.2575 to the greenback, or 79.52 US cents, weaker than Wednesday's close of C$1.2520, or 79.87 US cents. This was its weakest intraday level since April 2, 2009.
Market participants will be looking to a slew of data from the United States and economic growth data for November in Canada on Friday for further direction.
Osborne expects the currency to close somewhere near C$1.26 or a little above that level by the end of the week.
Canadian government bond prices were mixed across the maturity curve, with the longer-term securities lower. The two-year was down 3 Canadian cents to yield 0.450 percent and the benchmark 10-year was off 14 Canadian cents to yield 1.367 percent.
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