The Canadian CADUSD dollar weakened to its lowest level in 11 days against its US counterpart on Monday as rising COVID-19 cases in China weighed on investor sentiment and speculation that OPEC would increase output led to volatility in the price of oil.
The loonie was trading 0.4% lower at 1.3440 to the greenback, or 74.40 US cents, after touching its weakest intraday level since Nov. 10 at 1.3495.
“It’s predominantly being driven by exogenous factors,” said Bipan Rai, North America head of FX strategy at CIBC Capital Markets. “We see the (US) dollar up across the board; including against the Canadian dollar.”
The safe-haven US dollar advanced against a basket of major currencies, recouping some recent losses, as fresh COVID-19 curbs in China fueled worries over the global economic outlook and made traders shun riskier currencies.
The price of oil, one of Canada’s major exports, whipsawed as reports varied about whether Saudi Arabia and other OPEC oil producers are considering a half-million barrel daily output increase. US crude oil futures settled 0.4% lower at $79.73 a barrel.
Speculators have cut their bearish bets on the Canadian dollar to the lowest since September, data from the US Commodity Futures Trading Commission shown on Friday.
Canadian retail sales data is due on Tuesday which could offer clues on the strength of the domestic economy.
Canada’s yield curve, like the US yield curve, has inverted further this month, potentially sending a stronger signal that the economy is headed for recession.
The 10-year eased 3.9 basis points on Monday to 3.086%, while it fell 2.3 basis points further below the 2-year rate to a gap of roughly 87 basis points, the largest seen in Refinitiv data going back to 1994.