Canadian Dollar Falls as Stocks Decline

The loonie had a third week of losses as a fall in U.S. stocks and crude oil decreased the attractiveness for the high-yielding profile of the Canadian currency.

Canada is one of the world’s most important commodity producers, and being the U.S. its main exporting destination, a fall in their main stock indexes affected directly the outlook for the Canadian currency. Since signs of economic recovery started to appear two months ago, the price of crude oil and equities market around the world witnessed a sharp increase in their levels, and being the loonie a commodity-linked currency more attractive as risk appetite grows due to its high-yielding profile, it posted the highest gains in 59 years during the month of May following the rally in the crude oil price. As the price of stocks failed to continue its gains, Canada’s dollar entered its third week of losses, since risk aversion rebounded slightly, and commodities prices did not provide the necessary support for the loonie to maintain its high levels.

Economists refer the weak performance for the Canadian dollar also with a more solid outlook for the U.S. dollar, as investors realize that an economic chaos will not be installed in the U.S. and that the Federal Reserve stills in the control of the nation’s finances, the greenback rose, also forcing the Canadian currency further down.