The Canadian dollar, known as the “loonie,” has experienced a 0.5 percent decline against the US dollar, reaching its lowest level in eight days. Analysts note that the loonie was ill-prepared to withstand the recent strength of the US dollar, which has been dominant for nearly two months. This, coupled with a decrease in risk appetite, has contributed to the loonie’s dip. Investor sentiment has also led to a retreat in Wall Street’s primary indices. Meanwhile, the US dollar continues to strengthen against a basket of major currencies, as investors grapple with expectations of an extended period of restrictive monetary policy by the Federal Reserve.
Key Points:
- The Canadian dollar (CAD) has weakened by 0.5 percent against the US dollar (USD), trading at 1.3518 CAD to 1 USD.
- Michael Goshko, senior market analyst at Convera Canada ULC, notes that the Canadian dollar was not well-positioned to withstand the recent surge in the US dollar, which has persisted for nearly two months along with diminishing risk appetite.
- Canada, being a significant producer of commodities, especially oil, is sensitive to shifts in investor sentiment. The price of oil saw a modest 0.8 percent increase, reaching $90.39 per barrel, bolstered by expectations of tightened supply.
- Preliminary data from Statistics Canada revealed a notable increase in Canadian wholesale trade by 2.6 percent in August compared to July. Factory sales also saw a concurrent surge of 1 percent. Further insights into the domestic economy’s vigor are expected with the release of GDP data for July.
- The Canadian 10-year yield rose by 2 basis points to 4.046 percent, its highest point since December 2007, mirroring movements in US Treasuries.
- In a significant fiscal move, Canada has decided to increase the annual issuance limit for Canada Mortgage Bonds (CMBs) from C$40 billion to C$60 billion. This expansion aims to fund mortgage loans for multi-unit rental projects insured by the Canada Mortgage and Housing Corporation, as outlined by Finance Minister Chrystia Freeland.
Analysis: The Canadian dollar has faced a decline against the US dollar, reaching its lowest level in eight days. This drop is attributed to the robust performance of the US dollar over the past two months, alongside decreased risk appetite. Investor caution has also led to a retreat in Wall Street’s main indices. The Canadian economy, closely tied to commodities like oil, is susceptible to shifts in investor sentiment. The modest increase in oil prices reflects anticipations of tightened supply. Additionally, Canada’s decision to augment the annual issuance limit for Canada Mortgage Bonds signifies a significant fiscal move aimed at supporting multi-unit rental projects.
Background: The Canadian dollar (CAD) has experienced a 0.5 percent decline against the US dollar (USD), reaching its lowest level in eight days. Analysts attribute this dip to the recent strength of the US dollar, which has been dominant for nearly two months, along with decreased risk appetite. This has also led to a retreat in Wall Street’s primary indices. Canada, known for its significant production of commodities, especially oil, is sensitive to shifts in investor sentiment. The price of oil has seen a modest increase, driven by expectations of tightened supply. Additionally, Canada has made a notable fiscal decision to increase the annual issuance limit for Canada Mortgage Bonds, aimed at supporting multi-unit rental projects.