The Canadian dollar touched a fresh more than eight-month low against the greenback on Friday as the market continued to assess how quickly more interest rate hikes could come in the face of trade uncertainty with the United States. The currency hit a session low of C$1.3099, its lowest since June 28, shortly before the Bank of Canada began raising interest rates last year. For the week, the currency shed 2.2 percent, putting it on track for its biggest weekly decline since May 2016.
The loonie has been hit by comments from the head of the Bank of Canada, who said on Tuesday that the economy may be able to generate more growth without higher inflation, given the untapped potential in the labour market. Governor Stephen Poloz's remarks reinforced expectations the central bank can take its time raising rates after hiking three times since last July. "The market interpreted that as it means that it's far less likely that the Bank of Canada will move forward with further interest rate increases," said Sean Coakley, market strategist at Cambridge Global Payments.
At 4:02 pm EDT (2002 GMT), the Canadian dollar was trading down 0.3 percent at C$1.3093 to the greenback, or 76.38 US cents. Markets also expect Canadian policymakers may wait for greater clarity on the future of US trade policy after worries about a global trade war ramped up after President Donald Trump imposed tariffs on steel and aluminium imports this month. While Canada was exempted, Trump said the reprieve would be in place so long as there was progress on talks to renegotiate the North American Free Trade Agreement.
Canadian government bond prices were mixed across the maturity curve, with the two-year price down 0.5 Canadian cent to yield 1.763 percent and the benchmark 10-year rising 4 Canadian cents to yield 2.141 percent.
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