Asia

Loonie pulls back from nine-month high as oil prices fall

TORONTO (Reuters) – The Canadian dollar edged lower against its U.S. counterpart on Monday, retreating from Friday’s nine-month high, as oil prices were pressured by data showing China’s slowest economic growth in decades.

The price of oil, one of Canada’s major exports, fell as China’s data dimmed the outlook for crude demand. U.S. crude oil futures CLc1 settled 1.1% lower at $59.58 a barrel.

“Oil prices are lower and that obviously has a certain negative impact on the Canadian dollar,” said Rahim Madhavji, president of Knightsbridge Foreign Exchange.

At 3:36 p.m. (1936 GMT), the Canadian dollar CAD=D4 was trading 0.1% lower at 1.3049 to the greenback, or 76.63 U.S. cents. The currency, which on Friday touched its strongest intraday level since Oct. 25 at 1.3018, traded in a range of 1.3022 to 1.3052.

The modest decline for the loonie came as data from the Canadian Real Estate Association showed that resales of Canadian homes fell 0.2% in June from the previous month.

Tightening of mortgage rules and interest rate hikes by the Bank of Canada have weighed on Canada’s once red-hot housing market. Still, Canadian borrowers have benefited in recent months from a slide in global bond yields.

Last week, the Bank of Canada said the housing market was stabilizing, as it left its benchmark interest rate steady at 1.75% and made clear it had no intention of easing monetary policy.

The central bank’s stance has contrasted with dovish guidance last week from the U.S. Federal Reserve. Canada’s inflation report for June is due on Wednesday, which could offer further clues on the outlook for Canadian interest rates.

Speculators have raised bullish bets on the currency, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. As of July 9, net long positions rose to 9,226 contracts from 6,293 contracts in the prior week.

Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The two-year CA2YT=RR rose 2.5 Canadian cents to yield 1.568% and the 10-year CA10YT=RR was up 20 Canadian cents to yield 1.588%.

On Friday, the 10-year yield touched its highest intraday level in seven weeks at 1.649%.

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