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The Canadian dollar CADUSD weakened to its lowest level in more than four months against its U.S. counterpart on Monday, as the safe-haven greenback broadly climbed and Wall Street lost ground ahead of a policy decision this week by the Federal Reserve.

The loonie was trading 0.4% lower at 1.2905 to the greenback, or 77.49 U.S. cents, after touching its weakest level since Dec. 22 at 1.2913.

“The Canadian dollar is currently weakening in an environment of broad-based USD strength,” said Eric Theoret, global macro strategist at Manulife Investment Management.

The relationship between the loonie and its fundamental drivers, such as oil, “is still quite weak at the moment,” with the currency driven by broader market sentiment, including the performance of the S&P 500.

U.S. benchmark stock index the S&P 500 dropped and the U.S. dollar climbed against a basket of major currencies as traders positioned themselves for an expected half-point interest rate hike and the launch of quantitative tightening by the Fed. The central bank is due to meet on Tuesday and Wednesday.

“Today’s broader price action across asset markets is a result of higher real yields globally,” Theoret said.

Real yields, or the gap between nominal yields and inflation expectations, rose as the yield on 10-year U.S. Treasuries hit 3% for the first time in more than three years.

Meanwhile, domestic data showed that manufacturing activity expanded at a slower pace in April as the war in Ukraine contributed to capacity and cost pressures.

The price of oil, one of Canada’s major exports, settled 0.5% higher at $105.17 a barrel on fears supply might be crimped by a potential European Union ban on Russian crude.

The Canadian 10-year yield rose to its highest since July 2011 at 2.960% before dipping to 2.951%, up 7.9 basis points on the day.

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