The Canadian dollar was little changed against the US dollar on Friday despite a rise in oil prices as increasing violence in Iraq spurred a flight to safety. Oil prices surged on fears that the escalating violence in Iraq could disrupt oil exports from the second-largest Opec producer, as Iraq's most senior Shia cleric urged his followers to take up arms against advancing Sunni militants.
Brent crude pushed through $114 a barrel at one point to a nine-month high and US crude went as high as $107.68 during the session. While higher oil prices are traditionally a positive for the resource-linked Canadian dollar, the accompanying flight to safety from the conflict and fears of an impact on global growth offset that, said Rahim Madhavji, president at KnightsbridgeFX.com in Toronto.
"If (higher oil) is driven by any more uncertainty in Iraq, in the sense of civil war or if there's any military strike ... that will be negative to the (currency)," he said. The Canadian dollar ended the North American session at C$1.0856, or 92.11 US cents, little changed from Thursday's close of C$1.0855 or 92.12 US cents. "It's been moving pretty quietly in a tight range," said Madhavji.
The currency showed no reaction to the election of a majority Liberal government in Ontario, Canada's most populous province, on Thursday, and has indeed been moving in a close range over the past month, oscillating around the C$1.09, or 91.74 US cents, level. Madhavji expects that to continue, barring a major increase in geopolitical risk, until growth or inflation data force the Bank of Canada to alter its current dovish stance.
"Everyone's waiting for economic data or inflation data that's going to push (the currency) to one side or the other," he said. Canadian government bond prices were mixed across the maturity curve. The two-year was down 2.5 Canadian cents to yield 1.092 percent and the benchmark 10-year bond was up 3 Canadian cents to yield 2.313 percent.
Comments
Comments are closed.