TORONTO: The Canadian dollar gave back some of its weekly gain against the US dollar on Friday as trade negotiations between Canada and the United States broke down and markets looked ahead to an expected Bank of Canada interest rate cut next week.
The loonie was trading 0.1 percent lower at 1.40 per US dollar, or 71.43 US cents, after moving in a range of 1.3975 to 1.4039. For the week, the currency was up 0.1 percent, helped by hotter-than-expected domestic inflation data. Prime Minister Mark Carney said that Canada stands ready to resume trade talks with the United States that President Donald Trump halted over an anti-tariff advertisement issued by Ontario’s provincial government.
“The trade headline reinforces the pessimism around CAD and its fundamental backdrop is still pretty weak, so I think people are still happy to buy USD-CAD on dips until the growth side in Canada looks better,” said Erik Nelson, a macro strategist at Wells Fargo Securities in London.
Speculators have raised bearish bets on the Canadian dollar to the highest level since April, according to the latest data from the US Commodity Futures Trading Commission, which was produced before the federal government shutdown.
“I don’t think inflation alone is going to help the loonie,” Nelson said. “We still think the Bank of Canada is going to cut next week.”
The Bank of Canada will reduce its target for the overnight interest rate by 25 basis points to 2.25 percent on October 29 to support a weak economy, according to a Reuters poll.