Thursday, December 1

Risk aversion pins down Canadian dollar near 2-year low

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TORONTO — The Canadian dollar was little changed against its US counterpart on Tuesday but holding near its weakest level in more than two years as investor sentiment remained fragile ahead of a key US inflation reading this week.

The loonie was trading nearly unchanged at 1.3780 to the greenback, or 72.57 US cents, after touching its weakest intraday level since May 2020 at 1.3855.

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“At the moment, the Canadian dollar is really at the mercy of (investor) sentiment,” said Darren Richardson, chief operating officer at Richardson International Currency Exchange Inc.

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The S&P 500 seesawed and the safe-haven US dollar gave back some recent gains against a basket of major currencies ahead of US consumer price data on Thursday that could guide expectations for further interest rate hikes by the Federal Reserve.

Worries that aggressive tightening by central banks could tip some major economies into recession has hammered Wall Street this year.

Canada is a major producer of commodities, including oil, so the loonie is particularly sensitive to the global economic outlook.

US crude prices settled nearly 2% lower at $89.35 a barrel, extending the previous session’s decline, on concern over global demand.

The Bank of Canada has been among the central banks raising rates rapidly to tackle inflation.

There is scope to slow the economy without putting a lot of people out of work based on an “exceptionally high number” of job vacancies in the labor market, BoC Governor Tiff Macklem said on Sunday.

Canadian government bond yields were higher across a steeper curve as the market reopened following the Thanksgiving Day holiday on Monday.

The 10-year touched its highest level since June 21 at 3.472% before dipping to 3.439%, up 4.7 basis points on the day. (Reporting by Fergal Smith Editing by Bernadette Baum and Chizu Nomiyama)