‘A bruising to an already beaten currency’: Loonie slides to 14-month low, nears break below 70 cents US
The Canadian dollar weakened to a 14-month low against its U.S. counterpart on Tuesday as oil prices fell and a drop in technology stocks bolstered safe-haven demand for the greenback.
The loonie was trading 0.4% lower at 1.4214 per U.S. dollar, or 70.35 U.S. cents, after touching its weakest intraday level since April last year at 1.4217.
“The loonie has been on the backfoot for several weeks with well-documented reasoning of widening yield differentials in favor of the USD, slowing growth, trade uncertainty or the uneasy status quo and a mostly asymmetric risk response to the Iran war,” said Amo Sahota, director at Klarity FX in San Francisco.
“Today it feels like a bruising to an already beaten currency with traders searching for safe haven as tech stocks and chips struggle to hold on to their massive valuations,” Sahota said.
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The Nasdaq and the S&P 500 fell to over one-week lows, dragged down by sharp losses in semiconductor stocks as investors braced for a more hawkish Federal Reserve and scrutinized growing debt-funded AI spending.
The safe-haven U.S. dollar rose against a basket of major currencies, while the price of oil, one of Canada’s major exports, was trading 0.7% lower at $73.71 a barrel.
Investors kept a close watch on crude flows through the Strait of Hormuz following signs of progress in U.S.-Iran peace talks.
Bank of Canada Governor Tiff Macklem said the latest inflation reading showed price increases were concentrated in energy, but admitted that food inflation was a concern.
“Comments today by BoC Macklem provide little to lean towards CAD strength but do signal some relief on rising inflation concerns,” Sahota said.
Data on Monday showed that Canada’s annual inflation rate rose more than expected to 3.2% in May but measures of underlying inflation closely followed by the BoC were more subdued.
Canadian government bond yields moved lower across the curve, with the 10-year down 2.7 basis points at 3.442%.
