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C$ dives to 2004 lows as US$ firms, commodities concerns grow

C$ dives to 2004 lows as US$ firms, commodities concerns growTORONTO: The Canadian dollar crashed through 2009 lows against the US dollar on Friday to trade at levels not seen since 2004, pushed down by a stronger greenback and broad concerns that slow global economic growth will hurt commodities-driven currencies.

The move came as the price of oil, a major Canadian export, stabilized but remained below $ 49 a barrel. Weaker-than-expected economic data from China, the world’s biggest metals consumer, sent currencies linked to global commodity prices, such as the Canadian and Australian dollars, to multi-year lows.

“It’s a little bit of the momentum buying of USD/CAD, selling of (the Canadian dollar) … It’s a little bit tricky, you’re sort of in some of these open areas now,” said David Tulk, chief Canada macro strategist at TD Securities.

“The longer-term background trend supports USD/CAD higher: The more you read about China overnight and the weakness in commodity markets more generally, that’s been the narrative.”

At 9:47 a.m. EDT (1347 GMT), the Canadian dollar was at C$ 1.3077 to the greenback, or 76.47 US cents, weaker than the Bank of Canada’s official close of C$ 1.3039, or 76.69 US cents, on Thursday.

The loonie cracked through the March 2009 low of C$ 1.3066 early in the North American session, retreating as far as C$ 1.3103, or 76.32 US cents, a level not seen since Sept. 1, 2004.

Despite the significant retreat, the Canadian dollar was not the weakest performer against the greenback among major commodities currencies and strengthened against other commodities currencies.

Most strategists have been pointing to the C$ 1.32 to C$ 1.33 area, or around 75 US cents, as the next key levels, with C$ 1.39 to C$ 1.40 marked as potential long-term possibilities. The Canadian dollar was at just above C$ 1.40 in May 2004.

The next major economic event was seen as the US Federal Reserve’s rate decision due on Wednesday.

Canadian government bond prices were higher across the maturity curve, with the two-year price up 1 Canadian cent to yield 0.42 percent and the benchmark 10-year rising 19 Canadian cents to yield 1.481 percent.

The Canada-US two-year bond spread widened to -28.3 basis points, while the 10-year spread widened to 79.0 basis points.

Copyright Reuters, 2015

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