Canadian dollar hits 12-day low as U.S. counterpart rallies
TORONTO — The Canadian dollar weakened on Tuesday to its lowest level in nearly two weeks against its U.S. counterpart and as domestic data showed factory activity contracting for a fifth straight month.
The CAD was trading 0.3% lower at 1.3614 to the U.S. dollar, or 73.45 U.S. cents, after touching its weakest since Dec. 22 at 1.3679. The currency lost 6.8% in 2022, with much of the decline occurring since August.
“We expect an improved performance from the CAD in 2023 but gains are more likely to come later in the year, once it is clear that the Fed (U.S. Federal Reserve) tightening cycle is peaking,” Shaun Osborne, chief currency strategist at Scotiabank, said in a note.
Minutes from the Federal Reserve’s December policy meeting, due on Wednesday, could offer clues on the outlook for further interest rate hikes.
The U.S. dollar clawed back some recent declines against a basket of major currencies, while the price of oil, one of Canada’s major exports, was pressured by weak demand data from China and a gloomy economic outlook. U.S. crude prices were down 1.3% at $79.25 a barrel.
Canadian manufacturing activity contracted at a slightly faster rate in December as an uncertain economic outlook and high inflation undercut demand. The S&P Global Canada Manufacturing Purchasing Managers’ Index fell to a seasonally adjusted 49.2 in December from 49.6 in November.
Canadian government bond yields were lower across a flatter curve, tracking the move in U.S. Treasuries and German Bunds after data showed an easing of German inflation.
The 10-year yield fell 9.7 basis points to 3.194%, after touching last Friday its highest intraday level in more than seven weeks at 3.357%. (Reporting by Fergal Smith; Editing by Emelia Sithole-Matarise)
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