TORONTO: The Canadian dollar extended its previous session's losses against the US dollar on Wednesday, as softer crude prices and a dovish Bank of Canada remained the driving themes behind the currency's weakness.
Expectations that an oversupply of global crude stocks would continue, along with a report by the American Petroleum Institute that showed US crude stocks rose to another record high, kept oil prices under pressure. US prices were down 76 cents by about 9:15 am ET (1415 GMT).
Remarks by the Bank of Canada's Senior Deputy Governor Carolyn Wilkins, the first since the central bank confounded markets with a 25 basis point interest rate cut last month, also contributed to the currency's retreat. The Canadian economy was still operating below its potential, Wilkins said in a speech on Tuesday.
The loonie has fallen more than 8 percent so far this year, touching levels not seen in nearly six years as diverging monetary policies between the Bank of Canada and the US Federal Reserve and low oil prices continue to hurt the crude-exporting country.
"Since last week, where we had the move down towards C$1.23, it's basically been one-way since then, with the Canadian dollar weakening. We've had some negative, dovish comments from the Bank of Canada yesterday," said David Bradley, director of foreign exchange trading at Scotiabank.
"It's a pretty light weak for data ... so the currency's at the beck and call of what the broader US dollar is doing to some extent as well."
At 9:24 a.m. ET (1424 GMT), the Canadian dollar was at C$1.2637 to the US dollar, or 79.13 US cents, softer than Tuesday's finish at C$1.2574, or 79.53 US cents.
Bradley said markets are still buying USD/CAD on dips, but noted that liquidity was also an issue, creating more volatility as well.
Canadian government bond prices were higher across the maturity curve, with the two-year adding 4 Canadian cents to yield 0.406 percent and the benchmark 10-year rising 19 Canadian cents to yield 1.407 percent.
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