Canadian dollar weakens for seventh-straight day as yield spreads widen

Canadian dollar bills on table close up

The Canadian dollar on Thursday was on track for ‌its longest daily losing streak since January against its U.S. counterpart as the gap widened between Canadian and U.S. bond yields.

The loonie was trading 0.1 per cent lower at 1.3720 per U.S. dollar, or ​72.89 U.S. cents, after touching its weakest intraday level since April 16 at ​1.3737. It was the seventh-straight day of declines for the currency.

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“USD-CAD’s ⁠push to a four‑week high is really a story of relative momentum,” said Kevin ​Ford, FX & macro strategist at Convera.

“Hotter‑than‑expected U.S. inflation has kept the market leaning toward higher ​for longer (interest rates) in the U.S., while Canada has had little fresh macro this week to push back against last Friday’s softer labour print.”

The U.S. dollar added to recent gains against a basket of ​major currencies after economic data kept expectations intact that the Federal Reserve was unlikely ​to lower interest rates this year.

Canada’s two-year yield fell two basis points further below its U.S. ‌equivalent to ⁠a gap of about 105 basis points in favor of the U.S. note, marking the widest spread since Jan. 22. Investors tend to favor the higher-yielding currency.

Data on Friday showed that Canada’s economy lost 17,700 jobs in April and the unemployment rate rose ​to a six-month high ​of 6.9 per cent, indicating ⁠continued weakness in a labor market that has struggled in the face of trade uncertainty.

Trade uncertainty has also weighed on Canada’s ​housing market. Home sales posted a modest increase of 0.7 per cent in April ​from March ⁠after a slow start to the month, and prices edged lower, data from the Canadian Real Estate Association showed on Thursday.

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The price of oil, one of Canada’s major exports, was ⁠trading ​0.6 per cent higher at US$101.65 a barrel.

Canadian bond yields moved lower ​across a flatter curve. The 10-year was down 4 basis points at 3.532 per cent, trading around the middle of ​its range since the start of the month.

Reporting by Fergal Smith; Editing by Kirsten Donovan