The Canadian dollar tumbled to the lowest in four months as oil, the country’s second-largest export, extended its slide and traders ramped up bets on greater monetary-policy divergence between the Bank of Canada and the Federal Reserve.
The Canadian dollar declined for a fifth day, falling to the lowest since March 25. Crude fell in New York as producers continue to ramp up production even with oil stockpiles at the highest seasonal level in decades. The U.S. dollar rallied on speculation the Fed will signal at its policy meeting Wednesday that it’s on course to raise interest rates later this year.
"Crude is under pressure so that’s a big factor,” said Bipan Rai, senior foreign-exchange and macro strategist at Canadian Imperial Bank of Commerce in Toronto. “But we’re also starting to see the market become more cognizant of the fact that the Fed could be more hawkish than expected, which is leading to a firmer dollar."
The loonie, as the Canadian dollar is nicknamed, weakened 0.7 percent to trade at C$1.3224 per U.S. dollar as of 12:22 p.m. in Toronto. One Canadian dollar buys about 75.6 U.S. cents. The currency has lost 2.1 percent over the past five sessions.
Rai said the Canadian dollar could reach C$1.36 or C$1.37 against the greenback in the coming weeks.
The Canadian dollar will weaken to C$1.32 by the end of the year, according to the median of 49 forecasts compiled by Bloomberg.
Fed policy makers will meet Tuesday and Wednesday and Canada and the U.S. are scheduled to release monthly gross domestic product reports on Friday.