The Canadian dollar CADUSD weakened to a seven-month low against its U.S. counterpart on Thursday as investor sentiment turned gloomier and after the Bank of Canada said it may not need to raise interest rates further.
Shares around the world fell as companies posted mixed results and U.S. Treasury yields lingered near 5%. Investors have worried that the recent jump in long-term borrowing costs will derail economic activity.
“It feels like a classic risk-off move here, with equity market weakness denting risk sentiment and underpinning the USD,” said George Davis, chief technical strategist at RBC Capital Markets. “Weaker oil prices are also weighing on CAD.”
The price of oil, one of Canada’s major exports, settled 2.6% lower at $83.21 a barrel, while the U.S. dollar rose against a basket of currencies, helped by its safe-haven status and as data showed the U.S. economy growing at its fastest pace in nearly two years in the third quarter.
In contrast, a preliminary estimate showed Canadian factory sales falling 0.1% in September from August, adding to recent evidence of a slowdown in the domestic economy.
The Canadian dollar was trading 0.1% lower at 1.3815 to the greenback, or 72.39 U.S. cents, after touching its weakest since March 10 at 1.3843.
The BoC may not have to tighten further if inflation cools in line with the central bank’s expectations, Governor Tiff Macklem said in an interview with the Canadian Broadcasting Corp.
On Wednesday, the BoC held its benchmark interest rate at a 22-year high of 5.0%.
Canadian government bond yields fell across the curve as U.S. Treasury yields turned lower after failing to reach new highs. The 10-year was down 11.5 basis points at 4.007%.