Wednesday November 28, 2007 - 11:37:35 GMT
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INVESTICA Ltd - www.investica.co.uk
Oil drop hurts Canadian dollar
The Canadian dollar remained generally weaker on Tuesday and briefly challenged the parity level. After a limited correction, the Canadian currency again tested parity in European trading on Wednesday.
The Canadian currency was unsettled by a sharp drop in oil prices with other commodity prices also under selling pressure. Industrial metals prices have fallen sharply over the past week while gold has dipped below the US$800 per ounce level. Weaker commodity will remain an important negative factor for the Canadian dollar.
Although there are no significant data releases, there will also be further caution ahead the December 4th Bank of Canada policy meeting. Although extreme upward pressure on the currency has eased, there will still be pressure for and speculation over an interest rate cut which will unsettle the local currency.
The US dollar is still likely to face greater selling pressure above the parity level, especially if risk tolerances remain higher as this would improve underlying demand for the Canadian currency.
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