Canadian dollar drops by 0.5%, lowest in one week

The Canadian dollar, known as the “loonie,” has dropped by 0.5 percent against the US dollar, reaching its weakest level in eight days.

The Canadian dollar traded at 1.3518 to the greenback.

“The Canadian dollar was not positioned to resist the recent surge in the U.S. dollar for an extended period. We are witnessing the dominance of a robust U.S. dollar for nearly two months now, coupled with a diminishing risk appetite,” Michael Goshko, senior market analyst at Convera Canada ULC told Reuters.

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Investor sentiment waned, causing Wall Street’s primary indices to retreat, while the U.S. dollar (DXY) continued to gain ground against a basket of major currencies. This comes as investors grapple with the prospects of a prolonged period of restrictive monetary policy by the Federal Reserve.

Canada, a prominent producer of commodities, particularly oil, exhibits sensitivity to shifts in investor sentiment. In response, the price of oil registered a modest 0.8 percent increase, reaching $90.39 per barrel, bolstered by anticipations of tightened supply.

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Preliminary data from Statistics Canada indicated a noteworthy uptick in Canadian wholesale trade by 2.6 percent in August compared to July, with factory sales concurrently surging by 1 percent. Additional insights into the domestic economy’s vigor are anticipated with the release of GDP data for July on Friday.

Meanwhile, the Canadian 10-year yield ascended by 2 basis points to 4.046 percent, its highest point since December 2007, mirroring the movements in U.S. Treasuries.

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In a significant fiscal move, Canada has decided to augment the annual issuance limit for Canada Mortgage Bonds (CMBs) from C$40 billion to C$60 billion. This increase is designated to fund mortgage loans for multi-unit rental projects insured by the Canada Mortgage and Housing Corporation, as articulated by Finance Minister Chrystia Freeland.