Canadian dollar falls as investors shun risky assets

·2 min read
FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Monday as oil prices fell and the prospect of rising U.S. interest rates weighed on investor sentiment.

The Canadian dollar was trading 0.3% lower at 1.2684 to the greenback, or 78.84 U.S. cents, after trading in a range of 1.2611 to 1.2697.

"The Canadian dollar is getting swept up in the risk-off stance of markets," said Michael Goshko, corporate risk manager at Western Union Business Solutions.

Stock markets globally extended last week's decline as investors bet that the Federal Reserve would begin hiking interest rates as soon as March to combat inflation.

The U.S. Consumer Price Index (CPI) report for December is due on Wednesday, with analysts expecting the data to show the annual rate of inflation climbing to 7%.

Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to shifts in risk appetite.

U.S. crude prices settled 0.9% lower at $78.23 a barrel as the rapid global rise in Omicron coronavirus infections weighed on the demand outlook, overtaking concerns about oil supply from Kazakhstan.

On Friday, the loonie was boosted by stronger-than-expected domestic jobs data.

Still, data from the U.S. Commodity Futures Trading Commission shows that speculators have raised their bearish bets on the currency.

Canadian Prime Minister Justin Trudeau is pushing ahead with a vaccine mandate for international truckers despite increasing pressure from critics who say it will exacerbate driver shortages and drive up the price of goods imported from the United States.

Canadian government bond yields were mixed across the curve. The 10-year yield touched its highest level since Nov. 26 at 1.753% before dipping to 1.719%, up about half a basis point on the day.

(Reporting by Fergal Smith; Editing by Paul Simao)

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