The Canadian dollar fell to the lowest level in five months as crude oil, the nation’s largest export, traded at almost its lowest point in more than a year.
The currency weakened against all its 16 major peers after a report showed home prices were unchanged in July, the second indicator this week to suggest the housing market is fading as a driver of economic growth. The Bank of Canada said last week it is waiting for strong-enough exports to take the burden of economic growth from over-indebted consumers, prompting speculation it would lag behind the U.S. Federal Reserve raising interest rates.
“The growth story still favors the U.S.,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce, by phone from London. “When you overlay that with negative commodity correlation, then that just provides you with some impetus to be a buyer of the U.S. dollar against Canada.”
The loonie, as the Canadian dollar is called for the image of the aquatic bird on the C$1 coin, fell 0.9 percent to C$1.1035 per U.S. dollar at 5 a.m. in Toronto. It reached C$1.1059, the weakest since April 1. One loonie buys 90.62 U.S. cents.
Crude oil fell as much as 1.4 percent to $90.43 per barrel in New York, the lowest since May 2013, before trading at $93.14, according to data compiled by Bloomberg.
Canada’s New Home Price Index was unchanged in July from the previous month, Statistics Canada said from Ottawa.
BNP Paribas SA advised clients to exit positions betting on the Canadian dollar to rise against the euro. The bank initiated the position at the end of August in anticipation the European Central Bank would lower interest rates to bolster its failing economy, Daniel Katzive, the bank’s head of North American currency strategy, wrote in a note to clients,
The ECB cut rates at its Sept 4 policy meeting and the Canadian dollar has gained 1.4 percent against the euro since, according to Bloomberg data. Today, the loonie declined 1 percent to C$1.4262 per euro.
“We continue to view the EUR/CAD cross as a good vehicle for expressing a bearish EUR view, and will watch for opportunities to re-enter shorts,” New York-based Katzive wrote. A short position is a best that an asset will decline in value.