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Canadian dollar heads for weekly gain as U.S. dollar retreats
The Canadian dollar was on track to snap a five-week losing streak against its U.S. counterpart on Friday, supported by a retreat in the greenback and firmer oil prices, as investors reassessed the outlook for U.S. interest rates.
The loonie traded at around C$1.4170 per U.S. dollar, equivalent to 70.57 U.S. cents, in the latest available market data around the morning session. The U.S. dollar was down about 0.13% against the Canadian currency on the day.
The U.S. dollar’s retreat has helped the Canadian currency recover after domestic employment data last week weakened expectations for a Bank of Canada rate increase and pushed the loonie to an 18-month low.
The U.S. dollar was heading for a weekly decline against several major currencies after comments from Federal Reserve Chair Kevin Warsh reinforced expectations that policymakers could leave interest rates unchanged at their October meeting. A softer greenback can support the Canadian dollar by making it cheaper for investors to buy the currency.
Oil prices also offered support. Brent crude was up about 1.4% for the week at $106.28 a barrel, while U.S. West Texas Intermediate crude had gained 6.4% to $97.78, amid concerns about supply disruptions in the Middle East and a sharp drawdown in U.S. crude inventories.
Canada is a major energy exporter, making the loonie sensitive to changes in crude prices, although broader movements in the U.S. dollar and interest-rate expectations can offset the impact of oil.
The U.S. dollar-Canadian dollar exchange rate was down about 0.6% from its Oct. 9 close of C$1.4257, putting the Canadian currency on course for a weekly gain of roughly 0.6%. The move would reverse the previous week’s decline, when the loonie lost 0.2% and recorded its fifth consecutive weekly loss.
Investors were also assessing fresh U.S. inflation signals after producer prices rose 1.3% in September, the largest monthly increase in four-and-a-half years, strengthening concerns that elevated energy costs could keep inflation pressures persistent.
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