Canada’s dollar declined for the first time in six days against its U.S. counterpart as commodities fell and crude oil, the nation’s largest export, fluctuated after reaching more than $93 a barrel last week.
The currency paused from the longest weekly winning streak since October 2010 after a rally in higher-risk assets had pushed the Canadian dollar to a three-month high against the greenback. Stocks fell, with the Standard & Poor’s 500 Index halting its longest rally since 2010.
“We started to see equity markets peel off a bit and that’s probably why the Canadian dollar appreciation has stalled out,” Shaun Osborne, chief currency strategist at Toronto Dominion-Bank’s TD Securities unit in Toronto, said in a telephone interview. “I’m not a big believer in the sustainability of this move, but there’s nothing at the moment that suggests it’s going to turn around.”
Canada’s currency, nicknamed the loonie, was down 0.2 percent at 99.26 cents per U.S. dollar at 5 p.m. in Toronto after touching 99.05 cents. One Canadian dollar buys $1.0075.
Crude oil futures fluctuated after gaining as much as 1.4 percent and dropping as much as 0.9 percent. U.S. stocks slipped with the Standard & Poor’s 500 Index declining 0.1 percent.
The loonie may appreciate to as high as 98 cents versus the greenback “over the next month, if not sooner,” Blake Jespersen, managing director of foreign exchange in Toronto at Bank of Montreal, said in a telephone interview.
Government bonds fell, pushing the yield on Canada’s 10-year up two basis points, or 0.02 percentage point, to 1.80 percent. The price of the 2.75 percent securities due in June 2022 declined 18 cents to C$108.50.
Canada’s government will auction C$3.4 billion ($3.43 billion) in five-year notes Aug. 15. The securities carry a 1.5 percent coupon and mature in September 2017.
The loonie may strengthen to 98 cents against its U.S. peer after forming a gravestone Doji chart pattern Aug. 10, according to Toronto-Dominion Bank.
A gravestone Doji is a candlestick formation created when the opening and closing prices are equal and occur at the low of the day, indicating a balance of supply and demand. The Canadian dollar broke through support levels at 99.5 cents per U.S. dollar, which is the new resistance level for the pair, Osborne and Greg Moore, currency strategists at TD Securities, wrote in a note to clients today.
“The lack of upside traction Friday leaves a very obvious black mark against USD/CAD and implies that the recent downtrend has further to run,” Osborne and Moore wrote. “The bearish implications of Friday’s price signal are clear from its name.”
International and domestic economic slowing may impede the loonie’s rise against the greenback, according to a note from Capital Economics. Crude oil prices have been buoyed by “shaky” expectations such as stimulus action from global central banks and tensions in the Middle East, Amna Asaf, an economist in Toronto at the company, wrote in a note to clients today. A potential slump in the Canadian housing market could reduce the loonie’s appeal as a safe-haven currency, Asaf said.
“We therefore expect the recent rally in the Canadian dollar to wear off as the crisis in the euro-zone intensifies again, global commodity prices take another dip and the overheated Canadian domestic housing market runs out of steam,” Asaf wrote.
The currency has gained 3 percent this year against nine developed-nation peers monitored by Bloomberg Correlation-Weighted Indexes. The U.S. dollar lost 0.2 percent.