The Canadian dollar declined to a nine-day low against its broadly stronger U.S. counterpart on Thursday, as oil prices fell and investors worried that slower U.S. growth could hurt Canada’s export-dependent economy.
At 3:24 p.m. EDT (1924 GMT), the Canadian dollar was trading 0.6 per cent lower at 1.3380 to the greenback, or 74.74 U.S. cents. The currency touched its weakest since March 12 at 1.3401.
“The Canadian dollar, which has been a darling of the market for a while, is finally seeing some significant headwinds come its way,” said Amo Sahota, director at Klarity FX in San Francisco. “If the U.S. is concerned (about the outlook), then Canada needs to be more concerned as the little neighbour.”
On Wednesday, Federal Reserve policy-makers downgraded their U.S. growth, unemployment and inflation forecasts.
Canada sends about 75 per cent of its exports, including oil, to the United States.
U.S. crude oil futures settled 0.4 per cent lower on Thursday at $59.98 a barrel, while the U.S. dollar rallied against a basket of major currencies.
A report by Fitch Ratings saying that Canadian fiscal deficits will make the economy more vulnerable in a downturn, added to pressure on the Canadian dollar, Sahota said.
Canada’s combined federal and provincial government debt “remains close to a level that is incompatible with ‘AAA’ status,” Fitch Ratings said.
On Tuesday, Canada presented a federal budget that forecast a bigger fiscal deficit of C$19.8 billion in 2019-20 and projected a nearly 20 per cent jump in bond issuance.
Worries about the outlook overshadowed domestic data on Thursday showing increased hiring in February and a stronger-than-expected rise in January wholesale trade.
Canada’s inflation report for February and January retail sales data are due on Friday.
Canadian government bond prices edged lower across much of the yield curve, with the 10-year falling 6 Canadian cents to yield 1.673 per cent. Still, the 10-year yield touched its lowest intraday since June 2017 at 1.635 per cent.