Canadian dollar dives to 2004 lows

The Canadian dollar finished little changed against its US counterpart on Friday, but not before crashing to the lowest levels since 2004, hit by a confluence of factors including weak commodities and a dim global economic outlook. The move came as the price of oil, a major Canadian export, remained near $48 a barrel. Weaker-than-expected economic data from China, the world's biggest metals consumer, sent currencies linked to global commodity prices, such as the Canadian and Australian dollars, to multi-year lows. Momentum buying of USD/CAD and loonie selling also drove earlier moves.
David Bradley, director of foreign exchange trading at Bank of Nova Scotia, noted that the Canadian dollar crashed through its 2009 low Friday morning. "That triggered some stops, some short covering," he said, noting the quick move to C$1.31 before settling down. "Now that we're through some of the technical levels in USD/CAD, it definitely opens up the topside significantly. We could probably trade up toward C$1.34, C$1.35 by the end of the summer, or by back to school time."
The Canadian dollar finished at C$1.3035 to the greenback, or 76.72 US cents, little changed from the Bank of Canada's official close of C$1.3039, or 76.69 US cents, on Thursday. The loonie cracked through the March 2009 low of C$1.3066 early in the North American session, retreating as far as C$1.3103, or 76.32 US cents, a level not seen since September 1, 2004.
Many strategists are eyeing around C$1.33, or 75 US cents, as the next key levels, with upwards of C$1.39 and beyond marked as potential long-term possibilities. The Canadian dollar was at just above C$1.40 in May 2004. By the end of the session, the currency was stronger against many of its peers. The divergence between US and Canadian monetary policies, with the Federal Reserve expected to hike interest rates and the Bank of Canada having already cut rates twice this year, is expected to keep the Canadian dollar weaker against a stronger greenback.
A rout in commodity prices, particularly over global supply and demand concerns is expected to add to the pressure. Canadian government bond prices were mixed across the maturity curve, with the two-year price down 1 Canadian cent to yield 0.430 percent and the benchmark 10-year rising 11 Canadian cents to yield 1.489 percent.