Canadian dollar weakens as oil recovery loses momentum

The Canadian dollar weakened against the US dollar on Tuesday, returning some of yesterday’s strong gains, driven by falling oil prices and country data showing an unexpected trade deficit 78.70 US cents, after trading between 1.2665 and 1.2721. “Some of this weakness is attributed to the decline we’re seeing with crude oil prices,” said Edward Moya, senior market analyst at OANDA in New York. “The unrelenting rally in oil seems to indicate some exhaustion.”

The price of oil, one of Canada’s top exports, fell as investors worried that the resumption of indirect talks between the United States and Iran could revive an international nuclear deal. Economy and allow more oil exports from OPEC producers. U.S. crude oil futures fell 2.2% to $89.36 a barrel, while the dollar rose against a basket of major currencies. It is supported by the recent hawkish tone of the Federal Reserve. “The market is bracing for a positive Fed and that can be confirmed with the inflation report later this week.” US Consumer Price Index data for January will be released on Thursday.

On Monday, the loonie gained 0.8 percent, its biggest gain in nearly four weeks. Canada posted a trade deficit of C$137 million for December, a far cry from the C$2.5 billion surplus economists expected, as imports hit a new record high and exports down from November, and Canadian Government bond yields are higher on most curves, with 10-year maturities up 1.6 basis points to 1.854 percent. Fell 2.5 basis points below US levels, or a 10.3 basis point spread in favor of US bonds, the widest spread since last September.