TORONTO: The Canadian dollar weakened against its US counterpart on Monday as oil prices weighed and market strategists looked past a federal election to a central bank meeting later in the week.
Canadians look set to vote for political change on Monday, but a possible ouster of the ruling Conservatives could prove less of a drag on the commodity-linked currency, than any words of warning from the Bank of Canada on Wednesday.
"Canada is quite fiscally sound, and I think the debate the market is having with itself is much more about the direction of monetary policy than it is about government and fiscal policy," said Adam Cole, global head of FX strategy RBC Capital Markets.
At 9:09 a.m. ET (1309 GMT), the Canadian dollar was trading at C$1.2935 to the greenback, or 77.31 US cents, weaker than Friday's close of C$1.2911, or 77.45 US cents.
It was also underperforming most of its key currency counterparts.
US crude prices were down 2.37 percent to $46.14 a barrel, while Brent crude lost 2.54 percent to $49.18.
The Canadian currency has strengthened considerably this month, in line with a broader move towards riskier assets.
With the market expecting rates to be held steady through the middle of next year, Cole said the risk is that the bank is more worried than the market about the effect low crude prices are having on capital spending plans.
"The potential for re-pricing of rate-cut risk going forward is negative for the currency without this big prop of major risk appetite holding up," Cole said.
Canadian government bond prices were higher across the maturity curve, with the two-year up 1.5 Canadian cents to yield 0.530 percent and the benchmark 10-year was up 8 Canadian cents to yield 1.460 percent.
Comments
Comments are closed for this article.