TORONTO: The Canadian dollar slid against the greenback on Wednesday, hurt by a decline in global commodity prices a day after US central bank meeting minutes dented hopes for more economic stimulus, and as a Spanish debt auction drew weak results.
The US central bank's minutes from its March meeting, released Tuesday, suggested the appetite for a third dose of quantitative easing, so-called QE3, has decreased as the American recovery firms.
Investors were also reminded of the risks from Europe as Spain sold 2.6 billion euros of government bonds, toward the lower end of its target range and at higher yields than at previous auctions.
The Canadian dollar was little changed on Tuesday, but dropped Wednesday along with a sharp decline in commodities and equity markets.
"The Fed announcement has obviously shaken up the market a lot," said Darren Richardson, senior corporate dealer at CanadianForex, a commercial foreign exchange dealing firm.
"We saw some money flows yesterday afternoon that was maintaining Canadian dollar strength, but once that had come through we saw the lo onie f ollow the rest of the commodity currencies and take a tumble against the US dollar," he added.
The Canadian dollar finished at C$0.9964 versus the US currency, or $1.0036, down from Tuesday's close at C$0.9904 against the US dollar, or $1.0097.
The US dollar firmed further after data on Wednesday showed US private employers added 209,000 jobs in March, suggesting the labor market is strengthening. Job gains for January and February were also revised up to 182,000 and 230,000, respectively.
The improving American economy has helped boost the Canadian currency this year, particularly as event risks in Europe have subsided. But on Wednesday the greenback was firming against all other major currencies.
"The Canadian dollar is actually depreciating less than many other currencies compared to the US dollar," noted Charles St-Arnaud, Canadian economist and currency strategist at Nomura Securities International in New York.
Canada's dollar outperformed the euro, Swiss franc and Australian and New Zealand dollars.
The sharp move higher by the US currency hurt commodities, which are priced in US dollars. Oil fell about 2 percent and gold slid to a three-month low.
The Canadian dollar has gained more than 2 percent this year against the US currency.
Separately, a Reuters poll released on Wednesday showed the Canadian dollar at exactly $1.00 in one, three and six months from now. In a year, the currency is expected to strengthen slightly to C$0.988 versus the US dollar.
"The Canadian economy should mildly outpace the recovery in the US, which would keep the Canadian dollar stronger than the US (dollar)," said David Bradley, a director of foreign exchange trading at Scotia Capital.
Canadian government bond prices were higher across the curve, mimicking the rise in US Treasuries that followed the employment data and Fed minutes.
Canada's 2-year bond was up 8 Canadian cents to yield 1.218 percent, while the 10-year bond rose 61 Canadian cents to yield 2.127 percent.