The Canadian Dollar fell for a third straight day against the U.S. Dollar as risk averse investors fled to more liquid assets like the U.S. Dollar.
The Loonie is being dragged down by falling commodity prices, namely crude oil which has reached four month lows. Canada is a major exporter of crude oil and so its currency is known to be a commodity-linked currency.
Crude oil fell sharply yesterday after a surprise announcement by the International Energy Agency that it
will release 60 million barrels of government-held reserves over the next 30 days in an effort to push down crude prices and help global growth.
“The two worst-performing currencies right now are the Norwegian krone and the Canadian dollar. The two that are most susceptible to oil price movements — especially downward movements,” said David Watt, senior currency strategist at RBC Capital Markets.
“You’ve also got in the background just general angst about the global economy … the feet-on-the-ground indicators are that we’ve got a number of issues of caution,” he added.
Meanwhile, in addition to oil prices hurting the Canadian Dollar, the Bank of Canada’s Governor Mark Carney said in an interview published today that Canadian monetary policy may need to remain stimulative due to “substantial head-winds” facing the economy.
He commented to the Wall Street Journal that “Monetary policy may still need to be stimulative in order to close the output gap and in order to get inflation back to target.”
Canadian interest rates have not changed since last September as the Bank of Canada has kept its key interest rate unchanged at 1 percent. Its next rate decision is July 19.
Since Wednesday, the Canadian Dollar has lost almost 150 pips against the greenback,with USDCAD rising from Wednesday’s low of 0.9699 to a high of 0.9847 today.