TORONTO (Reuters) – The Canadian dollar edged lower against its U.S. counterpart on Monday as oil prices fell and investors sought to own greenbacks, betting that the U.S. currency would fare best as the global economy slows.
The U.S. dollar .DXY jumped as concerns grew that the latest round of U.S.-China talks may not yield a deal between the world’s largest economies before the March deadline.
“People want to be long U.S. dollars here,” said Scott Lampard, head of global markets at HSBC Bank Canada. “The sense is that the rest of the world is slowing at a pace that is more rapid than the U.S.”
Canada is a major producer of commodities, including oil, so its economy could be hurt by a slowdown in the global economy.
Oil prices fell as worries surrounding the resumption of U.S.-China trade talks overshadowed support from OPEC-led supply restraint. U.S. crude oil futures CLc1 settled 0.6 percent lower at $52.41 a barrel.
At 4 p.m. (2100 GMT), the Canadian dollar CAD=D4 was trading 0.1 percent lower at 1.3300 to the greenback, or 75.19 U.S. cents. The currency, which touched on Friday its weakest intraday level in two weeks at 1.3329, traded in a range of 1.3261 to 1.3319.
Still, the New Zealand dollar NZD= was the only G10 currency other than the greenback to outperform the loonie. It follows Canadian data last Friday showing bumper jobs numbers in January that far exceeded market expectations and highlighted the strength of the economy.
“You have got the bond market looking at the strength of the labor market in Canada and saying we feel like higher rates are warranted,” Lampard said.
The Bank of Canada has raised interest rates by a total of 125 basis points since July 2017. Chances of another hike before the end of the year have climbed since the jobs data to more than 30 percent from 13 percent, the overnight index swaps market indicated. BOCWATCH
Canadian government bond prices on Monday were lower across the yield curve in sympathy with U.S. Treasuries, as investors awaited U.S. data this week that will show inflation pressures in January.
The two-year CA2YT=RR fell 4 Canadian cents to yield 1.792 percent and the 10-year CA10YT=RR declined 25 Canadian cents to yield 1.910 percent.
Reporting by Fergal Smith; Editing by Lisa Shumaker