For the 7th consecutive day, the Canadian Dollar which is also known as Loonie declined against USD after decrease of the investors’ risk appetite. Many investors feel that the economic growth of the country is slowing more than the initial forecasts were made. Loonie went down by 0.5% against the greenback and is currently priced at C$1.0265 per USD. Futures on crude oil increased by 0.1% and are currently priced at $93.18 per barrel. Incidentally, crude oil is the largest export of the country.
Not only against USD, but Loonie weakened against most of its major counterparts. On 1st March, a Government report is scheduled to come out and economists feel that the same will talk of 0.2% contraction in Canada’s economy for December. Incidentally, in November, the economy grew by 0.3%.
The Currency Analyst of Oanda Corp., Dean Popplewell stated that the tier two currencies will face some heat because of the current political uncertainty in Italy. Dean added that investors are inclined to further risk off now, until a clear picture comes out in Italy.
The 120-day correlation coefficient between Loonie and S&P 500 index is now at 0.48, its lowest value since 30th October, 2008. Incidentally, a reading of 1 denotes that they are moving in lockstep. The benchmark 10-year Government bonds of Canada increased as the yields declined by 4 basis points to 1.90%. The 1.75% security which is scheduled to mature in June, 2022, also surged ahead by 35 cents to C$107.17.
According to the Currency Market Analyst of Monex Europe Ltd., Eimear Daly, USD is bound to get to stronger level as there is huge amount of risk coming out. Such high risk will definitely have a short term impact on both USD and Loonie, as predicted by Daly.
Since September, 2010, the benchmark interest rate of Canada has been kept at 1% by the policy makers. Mark Carney, the current Governor of Bank of Canada stated that a rate boost is not that urgent anymore as the inflation is expected to be below the 2% target.
Canadian retail sales declined by 2.1% in December to C$38.6 billion, marking its highest tumble since April, 2010. The consumer price index however increased by 0.5% in last month, if the figures of a year earlier are taken into comparison. In December, the same gauge advanced by 0.9%.