By Commodity News Service Canada
WINNIPEG, Jan. 2 – The Canadian dollar was sharply lower on Friday, testing the 85 cents US level. A sharp drop in crude oil values was behind the weakness, analysts said.
Since oil is one of Canada’s biggest exports, its more than 50 per cent drop since summer is likely to slow economic growth in the country, according to economists.
The Canadian dollar closed at US$0.8502 or US$1=C$1.1762 on Friday, which compares with Wednesday’s North American settlement of US$0.8620 or US$1=C$1.1601. Markets were closed for New Year’s Day on Thursday.
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General strength in the US dollar index, due to some positive employment data in the country and technical buying, was also bearish.
Ongoing ideas that the US will raise interest rates before Canada does further undermined the Canadian dollar, as did weakness in gold prices.
Canadian bonds closed higher on Friday, following the gains seen in the US Treasury market. Soft North American manufacturing data had investors flocking to safe-haven assets, such as bonds, brokers said.
The two-year bond yielded 1.004% late Friday, from 1.010% late Wednesday. The 10-year bond yielded 1.748%, from 1.789%. Bond yields fall as their prices rise.
