By Fergal Smith
TORONTO, Dec 15 (Reuters) – The Canadian dollar fell against a broadly stronger greenback on Thursday as a flurry of interest rate hikes, including by the European Central Bank, weighed on sentiment and data showed further weakening in Canada’s housing market.
The loonie CAD= was down 0.9% at 1.3665 to the greenback, or 73.18 U.S. cents, approaching its weakest level since early November. It traded in a range of 1.3541 to 1.3674.
“The market reaction to today’s hawkish ECB meeting has been negative, delivering broad-based risk aversion and USD strength,” said Eric Theoret, global macro strategist at Manulife Investment Management.
“The CAD is keeping pace with most of its G10 peers and outperforming the higher beta currencies like AUD and NZD.”
The Australian dollar AUD= fell 2.4% and the New Zealand dollar NZD= was down 1.8%. The safe-haven U.S. dollar .DXY rallied against a basket of major currencies, while equity markets globally and the price of oil, one of Canada’s major exports, were in retreat.
The ECB eased the pace of its interest rate hikes but stressed significant tightening remained ahead. It follows hawkish projections by the Federal Reserve on Wednesday as it hiked rates.
The Bank of Canada has also been tightening policy. It faces a challenge in 2023 convincing markets not to expect a swift reversal in its hiking campaign, as the recent decline in bond yields already works to lower some domestic borrowing costs.
Canadian home sales declined 3.3% in November from October, while the average selling price was down 12% on the year. Separate data for November showed housing starts dipping 0.2% compared with the previous month.
Canadian bond yields eased across the curve, tracking moves in U.S. Treasuries. The 5-year CA5YT=RR touched its lowest since Aug. 16 at 2.882% before recovering to 2.917%, down 2.9 basis points on the day.
(Reporting by Fergal Smith; Editing by Mark Potter and Jonathan Oatis)
((fergal.smith@thomsonreuters.com; +1 647 480 7446;))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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