Canadian dollar extends weekly decline as oil prices slide

The Canadian dollar CADUSD weakened against its U.S. counterpart on Friday, with the currency adding to this week’s decline as oil prices fell and data showed the largest divestment of Canadian securities by foreign investors in nearly four years.

The price of oil, one of Canada’s major exports, was on track for a second weekly decline, pressured by concern about weakening demand in China and further interest rate rises by the U.S. Federal Reserve.

U.S. crude prices fell 3.7 per cent to $78.62 a barrel, while the Canadian dollar was trading 0.3 per cent lower at 1.3360 to the greenback, or 74.85 U.S. cents.

It traded in a range of 1.3301 to 1.3368. For the week, it was on track to decline 0.8 per cent, after four straight weeks of gains.

Foreign investors sold a net C$22.3-billion ($16.7-billion) in Canadian securities in September, led by federal government bonds, following a revised C$26.2-billion total purchase in August, Statistics Canada said. This was the largest divestment since December 2018.

Separate data showed that producer prices in Canada rose by 2.4 per cent in October from September, outstripping analyst forecasts of a 0.4 per cent increase.

It was driven by higher prices for refined petroleum energy products, while a depreciating Canadian dollar adding to the upswing in prices.

The loonie fell as much as 9 per cent between August and October but has since clawed back nearly half of those losses.

To tackle inflation, the Bank of Canada has lifted interest rates to a 14-year high of 3.75 per cent. Money markets expect the central bank to hike at least 25 basis points further at its next policy decision on Dec. 7.

Canadian government bond yields were mixed across a flatter curve, with the 10-year down nearly one basis point at 3.106 per cent.

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