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Business Recorder - Canadian dollar hits more than five-month low
Monday, 15 September 2014
The Canadian dollar sold off against the greenback for a second straight session on Friday, touching a more than five-month low as a break through technical resistance barriers lent downward momentum to the currency. The loonie was down nearly 2 percent for the week, its worst week since early January, as markets have been focused on trying to gauge when the Federal Reserve might start to raise interest rates.
The loonie's weakness has accelerated since Thursday, when it broke through technical resistance at C$1.10 after previous failed attempts earlier in the week. Still, the currency stopped short of the C$1.11 mark, which is seen as the next hurdle to overcome. "On the technical picture, this is opening up a new range," said Ken Wills, currency strategist and broker at CanadianForex in Toronto.
"I would say looking at the medium- to long-term, we could be looking at a C$1.09 to C$1.11 or C$1.1150 with the way things are looking today," he said. A US economic recovery that is picking up steam, as well as a Fed that might raise rates sooner than expected, are likely to continue to benefit the US dollar, to the detriment of the loonie. Optimism over the US economy was reinforced by data that showed retail sales rose, as expected, in August, while the previous month was revised higher.
"When you look at the relative performance of the economies of the US and Canada, decent retail sales numbers reinforce the mindset that the US is probably still three to six months ahead of the Canadian economy in terms of where they are in the recovery," said Scott Smith, senior market analyst at Cambridge Mercantile Group in Calgary. "As that progresses, we'll see continued upward pressure on the US dollar-Canadian dollar."
The Canadian dollar ended the North American session at C$1.1094 to the greenback, or 90.14 US cents, weaker than Thursday's close of C$1.1047, or 90.52 US cents. The loonie hit a session low of C$1.1098, its lowest level since late March. Focus on central bank policy was intensifying ahead of the Fed's policy-setting meeting next week, with investors watching for any change in language that would signal when the Fed will raise rates.
Still, with the run up the US dollar has seen in anticipation of a change, there is the risk markets may have gotten ahead of themselves, said Wills. Canadian government bond prices were lower across the maturity curve, with the two-year off 2 Canadian cents to yield 1.159 percent and the benchmark 10-year down 35 Canadian cents to yield 2.238 percent.
From: Business Recorder
