TORONTO (Reuters) - The Canadian dollar weakened to a fresh eight-month low against its U.S. counterpart on Friday as oil tumbled and as the greenback padded its gains since the U.S. election this week.
For the week, the loonie lost 1 percent.
U.S. crude oil futures CLc1 settled $1.25 lower at $43.41 a barrel after OPEC said October output reached another record, casting doubt on whether its plan to limit production is achievable or enough to ease persisting oversupply. [O/R]
“I think things will probably continue to be volatile, probably moving against the loonie in the short term” until OPEC resolves oversupply issues for oil, said Jeff Scott, senior corporate dealer at OFX.
Oil is one of Canada’s major exports.
Investor demand for U.S. dollars to buy stocks, betting that policies from U.S. President-elect Donald Trump will be supportive of stock prices, has added to pressure on Canada’s currency, Scott said.
The U.S. dollar .DXY gained ground against a basket of major currencies.
At 4:33 p.m. EDT (2133 GMT), the Canadian dollar CAD=D4 was trading at C$1.3538 to the greenback, or 73.87 U.S. cents, weaker than Thursday's close of C$1.3483, or 74.17 U.S. cents.
The currency’s strongest level of the session was C$1.3456, while it touched its weakest since March 1 at C$1.3548.
Trump has vowed to either renegotiate or scrap the North American Free Trade Agreement, under which Canada sends 75 percent of all its exports to the United States.
“With the unforeseen risks of Trump in the White House,” Bank of Canada Governor Stephen Poloz may continue to favor a weaker Canadian dollar, said Scott.
“I think we could see him continue to jawbone the loonie.” he added.
Speaking at a central bank conference in Santiago, Poloz said he could not speculate on how Trump’s election as U.S. president would affect monetary policy, but that the central bank will respond to shocks as needed and rely on its inflation target to set interest rates.
Canada’s bond market was closed on Friday for Remembrance Day.
On Thursday, the 10-year yield touched its highest intraday since May at 1.498 percent as investors bet that Trump will enact policies that will increase inflation.
Reporting by Fergal Smith; Editing by Chizu Nomiyama and James Dalgleish
Our Standards: The Thomson Reuters Trust Principles.