TORONTO: The Canadian dollar retreated against the US currency on Thursday, tracking losses on global stock markets and in commodity prices as investors pared back expectations the US Federal Reserve will signal a new round of economic stimulus.
Fed Chairman Ben Bernanke will give a much anticipated speech at a meeting of central bankers in Jackson Hole, Wyoming, on Friday, but expectations are low he will offer market-moving news of a third round of economic stimulus.
Canadian and US shares fell alongside other risk assets as investors closed out positions ahead of Bernanke's speech.
"There's just some risk-shedding ahead of the announcement that Bernanke's going to do tomorrow," said John Curran, senior vice president at CanadianForex.
"I really don't think there's going to be any great surprises. I don't think they're going to announce any grand scheme."
Curran said the speech, a European Central Bank meeting next week, and the coming long weekend in North America all combined to prompt investors to pull some risk off the table.
The ECB is expected to unveil concrete plans to help crimp crippling borrowing costs in Spain and Italy at a policy meeting on Sept. 6 in another attempt to tackle the euro zone's three-year-old debt crisis.
The Canadian dollar finished the session at C$0.9923 versus the greenback, or $1.0078, down from Wednesday's close of C$0.9895, or $1.0106.
CURRENT ACCOUNT WIDENS
The currency barely moved after a report showed Canada's current account deficit grew more than expected in the second quarter, hit by lower energy exports and a higher level of imports.
But the report served as a reminder that the Canadian dollar's recent strength is mainly due to capital and not trade-related flows, leaving it vulnerable to capital flight if global worries re-emerge, CIBC World Markets' Emanuella Enenajor wrote in a note.
Canada's dollar weakened against most other major currencies such as the euro. But it firmed to a 2-1/2 month high against the Australian dollar, which was also hurt by falling commodity prices.
As well as Bernanke's speech, Friday will bring a slew of US economic data and second quarter GDP numbers for Canada, which are projected to be soft.
Canadian bond prices crept up across the curve on Thursday, with the two-year bond up 3 Canadian cents to yield 1.125 percent and the benchmark 10-year bond up 34 Canadian cents to yield 1.764 percent.
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