TORONTO/OTTAWA: The Canadian dollar weakened to a more than four-week low against the greenback on Monday as China's trade data disappointed and oil prices turned lower.
The loonie has fallen 4 percent from a 10-month high last week after weaker-than-expected domestic trade data and wildfire-driven oil production cuts in Alberta's oil sands region hurt Canada's economic outlook.
Economists say second-quarter growth may slow to a standstill, leaving the central bank on hold.
Investors have also been recalibrating their economic forecasts following last week's disappointing trade data. Strengthening exports are key to the Bank of Canada's outlook.
"It was really the trade data that in our view started to reshape expectations," said David Tulk, chief Canada macro strategist at TD Securities.
After the pessimism at the start of the year, sentiment had arguably swung to being too optimistic, said Tulk.
Speculators have increased bullish bets on the Canadian dollar, Commodity Futures Trading Commission data showed on Friday. Net long Canadian dollar positions rose to 18,943 contracts in the week ended May 3 from 11,999 the prior week.
However, some strategists have turned bearish on the loonie after technical support for the currency weakened last week.
"The time is ripe for the loonie to weaken after three months of sustained strength," said Bipan Rai, executive director, macro strategy at CIBC Capital Markets in a research note.
The Canadian dollar ended the North American trading session at C$1.2963 to the greenback, or 77.14 US cents, weaker than Friday's close of C$1.2919, or 77.41 US cents.
The currency touched its weakest since April 8 at C$1.3016.
China's exports and imports fell more than expected in April, underlining weak demand at home and abroad and cooling hopes of a recovery in the world's second-largest economy.
China is a major customer for Canada's commodity exports.
US crude futures prices ended down $1.22 at $43.44 a barrel on expectations that US crude inventories will build to record highs.
Canadian government bond prices rose across the maturity curve, with the two-year price up 6.5 Canadian cents to yield 0.528 percent and the benchmark 10-year rising 34 Canadian cents to yield 1.318 percent.
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