Canadian Dollar Follows Oil Down on Ebbing of Mideast Tensions
The Canadian dollar fell as an easing of tensions in the Middle East triggered a decline in the price of oil, the nation’s biggest export.
Speculation U.S.-Iranian relations are thawing pushed West Texas Intermediate crude to the lowest in more than six weeks before a possible meeting between President Barack Obama and Iran’s Hassan Rohani at the United Nations General Assembly today. The currency earlier approached a three-month high following a rebound in July retail sales.
The Canadian currency is following oil lower as developments in the Middle East imply more abundant oil supplies and “the risk premium comes off in the pricing of crude oil,” Jack Spitz, managing director of foreign exchange at National Bank of Canada (NA), said by phone from Toronto. “It’s no big surprise to see the dip buying mentality that exists in dollar-Canadian dollar still holds true today.”
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, closed 0.2 percent lower at C$1.03 per U.S. dollar at 5 p.m. in Toronto. It gained as much as 0.1 percent earlier and reached C$1.0182 per U.S. dollar Sept. 19, the highest since June. One loonie buys 97.09 U.S. cents.
Retail sales rose to C$40.3 billion ($39.1 billion) following a 0.6 percent decline in June, Statistics Canada said in Ottawa. Economists surveyed by Bloomberg News forecast a 0.5 percent increase, based on the median of 22 projections. The sales gain followed improvements in the nation’s wholesale and manufacturing sales during the same period, and slower inflation for the first time in four months in August.
“It’s summer retail sales -- you’d expect it to pick up,” John Curran, a senior vice president at CanadianForex Ltd., an online foreign-exchange dealer, said by phone from Toronto. “The overall picture for Canada will be tied to the U.S. We’ll have mediocre to decent growth. It’s going to take quite some time.”
Sales in July were led by a 3.2 percent gain at gasoline stations. Clothing and accessory stores posted a 1.9 percent gain and home furnishing retailers boosted receipts by 1.6 percent. Sales rose in eight of 11 categories making up 52 percent of total receipts.
Statistics Canada will report monthly gross domestic product data on Sept. 30.
“Retail sales is typically pretty important for Canada, we might be able to see some more strength in the Canadian dollar,” Greg T. Moore, a currency strategist at Toronto-Dominion Bank, said by phone from Toronto before the report.
WTI crude for November delivery declined 24 cents to $103.35 a barrel on the New York Mercantile Exchange while Western Canada Select dropped C$1.74 to C$72.48. The gap of $30 is the widest since February, as supply expectations weighs on demand for the heavier bitumen crude produced in Canada’s oil sands.
Iran, which has the world’s fourth-largest proven oil reserves, is a key player in Syria’s civil war, nuclear proliferation and Middle East peace. Any presidential encounter would mark the first exchange between leaders of the two nations since the 1979 Islamic revolution, during which the U.S. embassy in Tehran was stormed and 52 Americans inside were held hostage for 444 days.
The loonie has lost 1.4 percent so far this year, declining along with the currencies of fellow commodity exporters Australia and Norway, according to Bloomberg’s Correlation-Weighted Currency Index. The U.S. dollar has gained 2.78 percent.
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