The Canadian dollar edged lower against the U.S. dollar on Monday as falling crude prices limited support for the commodity-linked currency. A weaker greenback kept the loonie's losses contained.
The Canadian dollar edged lower against its U.S. counterpart on Monday, as falling crude prices weighed on the commodity-linked currency. A weaker U.S. dollar helped keep losses contained while investors assessed prospects for a diplomatic breakthrough in the Middle East.
USD/CAD ticks up to C$1.3973
USD/CAD traded at C$1.3973, so one U.S. dollar bought 1.3973 Canadian dollars. That puts the loonie at approximately 71.57 U.S. cents. The pair moved modestly higher from Friday's reported level of C$1.3955, a slight pullback in the Canadian currency.
Two forces pulled in opposite directions. Lower oil prices weighed on Canada's export-linked currency, while easing geopolitical concerns reduced demand for the U.S. dollar as a safe-haven asset.
Oil falls on Iran diplomacy
Oil prices fell sharply as diplomatic activity around the U.S.-Iran conflict raised hopes of easing disruptions to Middle Eastern energy supplies. Brent crude declined about 3.7% to $109.23 a barrel, while U.S. West Texas Intermediate fell 3.8% to $100.14, according to early Monday market data. The drop followed a strong rally in October that had lifted crude to six-month highs.
Yet cheaper oil did not translate into a stronger U.S. dollar. The greenback also weakened as investors reduced safe-haven positions on optimism that negotiations involving Iran, Qatar and the United States could ease tensions. The dollar index touched a one-month low, offsetting some of the pressure on the loonie.
Manufacturing data and jobs reports ahead
The loonie's near-term direction will depend on which of these forces dominates. A sustained decline in oil prices could weaken Canada's terms of trade and reduce support for the currency, while further progress towards a Middle East agreement could keep the U.S. dollar under pressure.
Investors will also assess manufacturing data from both countries on Monday: Canada's S&P Global Manufacturing PMI is due at 9:30 a.m. ET, followed by the U.S. ISM Manufacturing PMI at 10 a.m. ET. Employment reports from Canada and the United States on Friday could provide fresh signals on economic momentum and the outlook for interest rates.
Source: Investing.com
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