The Canadian dollar edged lower against its U.S. counterpart on Tuesday as oil and stock prices declined, although the loonie traded in a narrow range ahead of a Bank of Canada interest rate decision on Wednesday.
World shares slid towards their lowest level in a year, as negative drivers from fatigued earnings and Saudi Arabia’s diplomatic isolation to a brewing spat over Italy’s finances piled on the pressure.
Canada runs a current account deficit and exports many commodities, including oil, so its economy could be hurt if the global flow of trade or capital slows.
U.S. crude oil futures were down 2.4% at USD 67.73 a barrel after Saudi Arabia said it could supply more crude quickly if needed, reassuring investors ahead of U.S. sanctions on Iran’s crude exports that start next month.
At 9:17 a.m., the Canadian dollar was trading 0.1% lower at 1.3116 to the greenback, or 76.24 U.S. cents. The currency, which on Friday hit its weakest level in more than five weeks at 1.3132, traded in a range of 1.3083 to 1.3123.
Weaker-than-expected domestic data has added to recent pressure on the loonie. Since Friday, readings on inflation, retail sales and wholesale trade have undershot economists’ estimates.
Still, money markets expect the Bank of Canada to raise its key interest rate on Wednesday by 25 basis points to 1.75%. It would be the fifth hike since July 2017 by the central bank, which sees Canada’s economy operating near capacity.
Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The two-year rose 5 Canadian cents to yield 2.269 percent and the 10-year climbed 40 Canadian cents to yield 2.437%.