Canadian Dollar Trades Nearly 3-week Low Against Greenback
The Canadian dollar lost ground on Monday morning as crude-oil, the nation’s key export, tumbled on mounting concerns that the U.S. is heading back into recession.
Light sweet crude oil for October delivery is presently quoted at $84.29 a barrel, down $2.16 a barrel from its previous close of $86.45 a barrel in New York on Friday.
Oil prices fell slid on Friday following a report from the U.S. Labor Department showed the world’s largest economy failed to add any new jobs in August versus expectations for an increase in employment by about 60,000 jobs.
At the same time, the unemployment rate held at 9.1 percent, unchanged and in line with estimates. The lack of job growth during the month came as a modest increase in private sector employment was offset by another drop in government jobs.
The Canadian dollar reached as low as 0.9935 against the greenback, its lowest level since August 18, before shedding some gains around 10:20 am ET. The greenback-loonie pair is presently trading a few pips above the key 0.99 mark. If the Canadian currency weakens further, 0.9970 is seen as the next likely target level.
The loonie also slipped to a 10-day low of 77.43 against the Japanese yen around this time and reversed direction thereafter. The loonie-yen pair is presently worth 77.72 with 77.15 seen as its next likely downside support level.
Japan’s service sector activity contracted for a seventh consecutive month in August, latest survey results from Markit Economics showed. The headline business activity index fell to 44.3 in August from 45.3 in July. The latest reading is the lowest in three months. An index score below 50 suggests contraction of the sector.
The Canadian dollar also tested its Asian session’s low against the euro, hitting as much as 1.3993 before leveling off around 11:00 am ET. In near-term, the loonie may test support at its psychologically important support level of 1.40.
Reports suggested that German Chancellor Angela Merkel’s ruling party has lost in local elections on Sunday. Merkel is already facing criticism at home over her handling of the euro-zone debt crisis and Germany’s slowing economy.
European Central Bank President Jean-Claude Trichet on Monday called for stronger governance in the euro area and fast execution of reforms agreed upon by member states in July. A stronger economic governance will provide early warning and automatic sanctions for nations that violate fiscal rules, Trichet told a conference in Paris.
With the US and Canadian markets are closed today on account of Labor day holiday, market focus is shifted to central banks decisions this week.
The Reserve Bank of Australia is set to announce decision tomorrow, Banks of Japan and Canada will be on Wednesday and the Bank of England and the European Central Bank issue rate decisions on Thursday. Market is not expecting any change in interest rate from any of these central banks.
