CAD’s Performance Impacted By Oil Price

Canada’s currency slides to 2-month low on risk aversion, so, the Canadian dollar weakens 0.4% against its American counterpart. The current level touches its weakest since July 14 at 1.3214.

The decline comes on Thursday as oil prices fell and the prospect of aggressive tightening by the Fed’s next meeting impacted investor sentiment. The Canadian dollar is maintaining defensive stance in an environment of broad-based risk aversion. Fundamental factors are also deteriorating, as renewed weakness in oil prices are noted.

Wall Street’s main indexes fell as a slew of economic data pointed to pliability in the US economy which could keep the Fed’s track for aggressive interest rate hikes. Oil, one of Canada’s major exports, was pressured by expectations of weaker demand. US crude oil futures settled 3.8% lower at $85.10 a barrel.

Canada’s average resale home price fell 3.9% from a year ago in August but was up 1.2% on the month as the market appeared to stabilize in the Greater Toronto Area. A series of rapid interest rate hikes by the BoC has pressured Canada’s previously red-hot housing market in recent months.

As investors weigh how much further the BoC will tighten, the level of underlying inflation is likely to be a better signal than the central bank’s much scrutinized estimate of the neutral interest rate, economists say.

Canada’s government bond yields climbed across a more deeply inverted curve, tracking the move in US Treasuries. The 2-year touched its highest since December 2007 at 3.857% before dipping to 3.838%, up 7.8 basis points on the day. It was trading 7.7 basis points further above the 10-year at a gap of 67.8 basis points.