The Canadian dollar has been declining in the past two days reaching a two-week low against the U.S. dollar in the US trading session on Wednesday. The key driver was commodity prices which have slid drastically this week.
Traditionally the Loonie is correlated to commodity prices, meaning as the price of a commodity falls, so does the Canadian Dollar.
Crude oil inventories released today showing a greater than increase in crude oil stockpiles. The increase in inventory consequently caused prices to fall below $110 a barrel.
Spot gold plummeted from a US session high of $1,542.98 down to $1,505.73.
Silver extended losses for the third day, falling down to $38.94 from a US session high of $41.84.
Meanwhile, equities were also significantly lower as risk appetite shrunk after release of US data today which show the US economy is slowing down as figures for services sector growth were down for April. There are also concerns about a decline in growth in China.
The disappointing data from the US helped push up Canadian government bonds which are considered to be a safe haven and contrarily U.S. Treasuries moved up higher.
“The Canadian dollar being a commodity-based currency it seems to be taking a bit of a hit along with the Australian dollar,” commented John Curran, senior vice president at CanadianForex, a commercial foreign exchange dealing firm.
He added that “It’s a general strengthening of U.S. dollars in any case .This move in commodities has hurt the Canadian dollar and probably caught a few people on the wrong foot.”
At 1400GMT, the greenback rose against the Loonie with the USDCAD pair hitting a high of 0.9602, the highest since April 27. This was a gain of 65 pips from the US trading session opening level of 0.9537.
The two-year bond edged up 2 Canadian cents to yield 1.689 percent, while the 10-year bond gained 24 Canadian cents to yield 3.128 percent.