Canadian forex review: C$ down sharply

By Commodity News Service Canada

WINNIPEG, Jan. 14 – The Canadian dollar dropped sharply on Tuesday, losing more than three-quarters of a cent against the US dollar. Strong US economic data, which could encourage more stimulus easing measures in the US, was bearish, analysts said.

Retail sales in the US increased by 0.2 per cent in December, beating expectations of a 0.1 per cent jump, the US Commerce Department said.

The Canadian currency closed at US$0.9134 or US$1=C$1.0948 on Tuesday, which compares with Monday’s North American settlement of US$0.9220 or US$=C$1.0846.

The Bank of Canada’s recent dovish stance also undermined the loonie, as traders look ahead to their latest interest rate announcement next week. It is expected that interest rates in Canada will remain unchanged.

Spillover pressure from the declines seen in gold and copper prices was also bearish for the Canadian dollar. Though, stronger crude oil prices provided some support.

Canadian bonds closed lower, following the US Treasury market after the release of the strong retail sales data from the US, brokers said.

The two-year bond yielded 1.055% late Tuesday, from 1.038% late Monday. The 10-year bond yielded 2.574%, from 2.544%. Bond yields fall as their prices rise.