The Canadian dollar weakened against its U.S. counterpart on Tuesday as the greenback broadly climbed and as investors, who have recently turned bullish on the loonie, awaited an interest rate decision on Wednesday by the Bank of Canada.
The Bank of Canada is widely expected to leave its benchmark interest rate on hold at 1.75 per cent, despite expected policy-easing as soon as this month by the U.S. Federal Reserve. The central bank has said that there was evidence that a slowdown in the domestic economy was temporary.
The U.S. dollar gained against a basket of major currencies as investors reassessed their expectations of how much the Fed may cut interest rates this month. Fed Chief Jerome Powell is due to testify before Congress on Wednesday.
The price of oil, one of Canada’s major exports, was pressured by worries about the U.S.-China trade dispute that has been dragging down the global economy and oil demand. U.S. crude oil futures fell 0.3 per cent to $57.5 a barrel.
At 9:42 a.m., the Canadian dollar was trading 0.2 per cent lower at 1.3127 to the greenback, or 76.18 U.S. cents. It was the third straight session that the currency has declined, after it notched last Thursday an eight-month high at 1.3038.
The loonie traded on Tuesday in a range of 1.3093 to 1.3135.
Speculators have turned bullish on the Canadian dollar for the first time since March 2018, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Monday. As of July 2, there were 6,293 contracts net long the loonie, which is a swing from 14,790 contracts net short the currency in the prior week.
Canadian housing starts rose much more than expected in June, to a seasonally adjusted annualized rate of 245,657 units, the Canadian Mortgage and Housing Corporation (CMHC) said.
Separate data from Statistics Canada showed that the value of building permits fell by 13 per cent in May from April, largely due to the value of permits in British Columbia returning to recent levels following a surge in April.
Canadian government bond prices were higher across the yield curve, with the two-year up 2 cents to yield 1.662 per cent and the 10-year rising 2 cents to yield 1.578 per cent.
The 10-year yield touched its highest intraday since May 30 at 1.594 per cent.
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