Canadian dollar falls for third day as U.S. shutdown persists

Canada’s dollar (FOREX:CADUSD) fell a third day as the government of its largest trading partner remained shut amid a political impasse about budgeting and lifting government borrowing authority.

The currency reached a four-week low as crude oil, the nation’s largest export, declined and gold fell for a second day. A report yesterday showed Canada’s trade deficit widened in August even as exports to the U.S. that reached the highest since the end of 2011. Jobs growth slowed last month, according to a Bloomberg survey of economists before the government report on Oct. 11.

“We’ve seen some signals the U.S. slowdown may spill over to Canada, and we’ve had some weak trade numbers,” Shaun Osborne, chief currency strategist at Toronto-Dominion Bank’s TD Securities unit in Toronto, said by phone. “The Canadian dollar has really been sidelined and moving sideways for the past couple of weeks and I don’t think that’s going to change in the near term.”

The loonie, nicknamed for the image of the aquatic bird on the C$1 coin, declined 0.2 percent to C$1.0384 per U.S. dollar at 9:55 a.m. in Toronto, after reaching the weakest level since Sept. 9. One Canadian dollar buys 96.30 U.S. cents.

The currency traded weaker than its 50-, 100- and 200-day moving averages for a second day. Crude oil futures dropped 1 percent to $102.50 a barrel in New York while gold futures lost 0.9 percent to $1,306.88 per ounce.

Bond Trade

Canada’s benchmark 10-year government bond yields were little changed at 2.56 percent. The 1.5 percent securities maturing in June 2023 added three cents to C$91.01.

The government plans to sell C$2.7 billion ($2.6 billion) of three-year bonds, according to the Bank of Canada. The securities mature in February 2017.

The August trade deficit increased to C$1.31 billion and July’s shortfall was raised to C$1.19 billion from an initial C$931 million, Statistics Canada said yesterday in Ottawa.

President Barack Obama and Republican lawmakers continue to tussle about reopening the government and raising the debt ceiling, which had sent Treasury bill rates to the highest since October 2008.

The White House plan to nominate Janet Yellen, who is seen as sympathetic to the central bank’s stimulus measures, to lead the Federal Reserve sparked a rally in stocks. S&P 500 futures rose 0.3 percent. The minutes of the Fed’s last policy meeting may provide more insight into the U.S. central bank’s plans for monetary stimulus.

The Canadian dollar has lost 2.2 percent this year against nine developed-market peers tracked by the Bloomberg Correlation-Weighted Index. The U.S. dollar is up 2.9 percent, while the Australian currency fell 7.4 percent.

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