CAD: CANADIAN DOLLAR HITS 5-WEEK LOW
1. The Canadian dollar (CAD) weakened to a five-week low against its U.S. counterpart on Monday as speculators raised their bearish bets on the currency ahead of a potential interest rate cut this week by the Bank of Canada.
The Canadian Dollar (CAD) is experiencing a decline, trading 0.2% lower at 1.3760 to the U.S. Dollar (USD), equivalent to 72.67 U.S. cents. This follows an intraday low of 1.3774, the weakest since June 14.
Shaun Osborne, Scotiabank's chief currency strategist, highlighted that the CAD's performance this week is focused on the Bank of Canada's (BoC) policy decision on Wednesday. A 25 basis point rate cut is largely anticipated.
The BoC is expected to lower its benchmark interest rate by 25 basis points to 4.50%, marking the second reduction in two months, due to easing inflation and declining retail sales. Investors see a 94% likelihood of a rate cut this week and anticipate a total of 62 basis points of easing by year-end, based on swaps market data.
Speculative positions have also shifted, with non-commercial accounts increasing their net short positions in the CAD to 132,473 contracts as of July 16, up from 111,212 the previous week, according to the U.S. Commodity Futures Trading Commission. In June, these net shorts peaked at a record 147,931 contracts.
Oil prices, a significant export for Canada, have also impacted the CAD. U.S. crude oil futures dropped to $79.85 a barrel, a five-week low, following China's unexpected short-term policy rate cut, which failed to boost market sentiment.
In the bond market, Canadian yields showed mixed results across a flatter curve, with the 10-year yield down by 2 basis points at 3.377%.
