The Canadian dollar hit a five-month low against its U.S. counterpart on Tuesday as investors weighed weak Chinese data and awaited the Bank of Canada’s interest rate decision, but rising oil prices capped the currency’s slide.
The loonie traded 0.3% lower at 1.3636 per dollar, or 73.34 US cents, after hitting its lowest level since March 28 at 1.3669.
“Weakness in the Chinese services PMI is the main reason for the overnight decline in my view,” said Erik Bregar, director of currency and precious metals management at Silver Gold Bull. “New lows were made this morning, but oil has pulled them back.
China’s services activity grew at the slowest pace in eight months in August as weak demand continued to weigh on the world’s second-largest economy.
Concerns about global growth, particularly in China, have prompted investors to turn to the safe-haven US dollar. It rose against a basket of major currencies, adding to its gains in recent weeks as bond yields rose.
“I think we’re going to have to see something a lot more constructive on the commodity front, on the US rates front, before the CAD can turn around,” Bregar said.
Oil rose 1.3% to $86.69 a barrel after Saudi Arabia and Russia announced further extensions to voluntary supply curbs.
Investors raised bets that the Bank of Canada will keep its key interest rate on hold at 5.00% on Wednesday after recent second-quarter data showed a surprise contraction in the Canadian economy.
Most economists polled by Reuters expect the Bank of Canada to avoid…
Canadian government bond yields rose along the curve following movements in US Treasuries. The 10-year rose by 12.6 basis points to 3.695%. (Reporting by Fergal Smith Editing by Nick Zieminski)
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