Canada’s Dollar Retreats on Oil, Risk Aversion

The Canadian dollar declined versus its U.S. counterpart and lower-yielding currencies as risk aversion rose impacting markets with extreme influence in the loonie rates, those of raw materials and equities, which dropped globally this Friday.

The loonie was impacted today as energetic and metallic commodities declined, specially the crude oil, as raw material exports account for more than half of the country’s international trade revenue, in a day of bearish markets in New York and Toronto. China’s new tightening lending policy declined appeal for high-yielding currencies, and despite U.S. mediocre data published in reports this Friday showing a slow down in the country’s inflation, the greenback advanced versus the loonie after touching a three-month low earlier this week.

The Canadian dollar has been fluctuated in almost perfect correlation with commodities in the beginning of 2010, despite the country’s fundamentals, which are also adding confidence for the loonie to gain in currency markets, according to analysts. As the crude oil retreated below $80 a barrel, the loonie’s rally was halted, but may continue if risk appetite returns during the next weeks.

USD/CAD traded at 1.0284 as of 16:38 GMT after touching 1.0219 yesterday. CAD/JPY declined to 88.27 from 88.85.

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