The Canadian dollar was down near a four-month low as the nation's largest export, crude oil, fell to its lowest level in over a year. The loonie had gained against the U.S. dollar on Wednesday after a second consecutive rally above C$1.10 was not enough to hold in trade primarily propelled by the U.S. dollar side of the equation, reports Reuters.
Canada's currency weakened against all its 16 major counterparts following a report showing that home prices remained the same in July. This was this week's second indicator that the housing market may no longer be a leading driver of economic growth. The Bank of Canada recently announced that it's waiting for strong exports to alleviate the burden of economic growth from over-indebted consumers. This sparked speculation that it would fall behind the U.S. Federal Reserve in raising interest rates, reports Bloomberg.
Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce, told Bloomberg by phone from London, "The growth story still favors the U.S. When you overlay that with negative commodity correlation, then that just provides you with some impetus to be a buyer of the U.S. dollar against Canada."
According to Reuters, the loonie could decline to C$1.12 by the end of the year, while in the next couple of weeks it could also consolidate near C$1.08.
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