The Canadian dollar CADUSD was little changed against the greenback on Thursday, with the currency giving back earlier gains as data showing that Canada’s service sector contracted for a seventh straight month added to worries about a possible recession.
The loonie was trading nearly unchanged at 1.3355 to the greenback, or 74.88 U.S. cents, after moving in a range of 1.3318 to 1.3365. On Wednesday, the currency touched its weakest intraday level in nearly two weeks, at 1.3371.
“Having started the trading session reflecting the positive tone in equities, the Canadian dollar received a dose of reality as data again highlighted the elevated risk that the economy is undergoing a recession,” said Simon Harvey, head of FX analysis for Monex Europe and Monex Canada.
Activity in Canada’s service sector deteriorated in December as elevated borrowing costs weighed on the housing market, S&P Global Canada services PMI data showed.
The headline business activity index edged up to 44.6 in December from a near three-and-a-half-year low of 44.5 in November. But it remained well below the 50 threshold that separates expansion from contraction in the sector. The index has been below 50 since June.
Canada’s employment report for December, due on Friday, could offer further clues on the state of the economy. Analysts expect a jobs gain of 13,500.
A decline in the price of oil, one of Canada’s major exports, was also a headwind for the currency as massive weekly gasoline and distillate stock builds overshadowed a larger-than-expected crude stock draw. U.S. crude futures were down 0.6 per cent at $72.28 a barrel.
Canadian bond yields rose across the curve. The market was tracking moves in U.S. Treasuries as data showed the number of Americans filing new claims for jobless benefits dropping to a two-month low.
The 10-year yield was up 7.3 basis points at 3.233 per cent.