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Strong US Data, Declining Oil Prices send Canadian Dollar to Fresh Lows

H.S. Borji
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Strong US Data, Declining Oil Prices send Canadian Dollar to Fresh Lows

The Canadian dollar declined sharply against its US counterpart Tuesday, as a combination of weak oil prices and strong US data kept demand for the commodity currency in check.

The loonie, as Canada’s currency is called, tumbled half a percent to 0.9123 US, rebounding from an intraday low of 0.9111 US. The loonie’s freefall in recent weeks has been precipitated by mixed Canadian data and a generally stronger US dollar, which continues to assert its dominance on the foreign exchange.

The USDCAD pair advanced more than half a percent to 1.0961.

Today’s fall sent the loonie to its lowest level in three months. Canada’s currency has declined 3 percent against the greenback over the past month.

The US dollar index, meanwhile, has advanced 1.6 percent over the past three weeks.

In other trading, the euro climbed against the loonie, as the EURCAD advanced 0.16 percent to 1.4661.

The British pound surged against the Canadian dollar, as the GBPUSD climbed 0.63 percent to 1.8506.

The loonie tumbled half a percent against the Japanese yen, as the CADJPY traded at 93.57.

Declining energy prices continued to weigh on the loonie Tuesday. West Texas Intermediate Oil, which was valued at $105 a barrel in June, declined 85 cents to $97.44 a barrel.

Global benchmark Brent tumbled 82 cents to $104.59 a barrel.

In economic data, Chinese service activity tumbled into neutral territory last month, as a slowdown in the real estate sector weighed on business activity.

HSBC’s gauge of Chinese services activity declined from 53.1 to 50, the level that separates expansion from contraction for the sector.

In US data, factory orders rebounded sharply in June, a sign the manufacturing sector continued to support recovery heading into the third quarter.

US factory orders advanced 1.1 percent, following a revised 0.6 percent drop in May, government data revealed today.

Factory orders were up 2.5 percent compared to a year ago.

Separately, US service activity last month reached its highest level since January 2008, as new business growth led to greater payroll activity.

The Institute for Supply Management’s services PMI rose 2.7 percentage points to 58.7, exceeding estimates.

Canada had no economic data to report on Tuesday.

On Friday the government’s statistics agency will release July employment figures. Canadian employment levels unexpectedly dropped 9,400 in June, raising concern about Canada’s recovery.

Economists expect employment levels to rise by more than 23,000 in July.

The loonie will also react to several less volatile releases over the next several days.

On Wednesday Statistics Canada will release trade figures for the month of June.

Thursday sees the release of June building permits data and the Richard Ivey purchasing managers’ index, a gauge of Canadian business activity.

Canada’s currency is forecast to weaken further, falling below the 90 US cent mark by the end of the year. Long-term, the loonie is expected to weaken to the 85- to 88-cent range against the US dollar. The Bank of Canada hopes this will boost exports and help the country’s manufacturing sector recover at a faster pace.

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