The Canadian dollar slipped 0.1% against the U.S. dollar on Friday, continuing a weekly decline as fresh data showed the country's factories are still shrinking.
Weekly Move of the Canadian Dollar
At the end of the day the loonie was trading at 1.3740 per U.S. dollar (about 72.78 U.S. cents), down from a low of 1.3701 earlier in the session. Over the past five trading days the currency is on track for a 0.5% loss, though it remains up about 4.8% for the calendar year.
Manufacturing Weakness Persists
Canada’s S&P Global Manufacturing Purchasing Managers' Index (PMI) rose slightly to 48.6 in December from 48.4 in November, but a reading below 50 still signals contraction. This marks the 11th consecutive month the sector has shrunk, highlighting ongoing weakness in domestic demand.
Oil Prices and Trade Balance
Oil, a key export for Canada, fell 0.7% to $57.00 a barrel as traders weighed concerns over oversupply against geopolitical risks. While trade losses with the United States remain, gains in metals, resources, and agriculture have helped offset some of the pressure.
Bond Yields Follow U.S. Treasury Moves
Canadian government bond yields rose across the curve, mirroring the U.S. Treasury market. The 10‑year yield climbed 3.7 basis points to 3.472%.
What This Means for Investors
- Currency traders may see continued pressure on the loonie if manufacturing stays weak.
- Investors in Canadian equities should watch resource and commodity sectors, which can benefit from a lower currency.
- Bond investors need to monitor U.S. rate outlooks, as Canadian yields tend to move with U.S. Treasury rates.
Remember, this is just my perspective, not a prediction. Do your own research and consider your risk tolerance before making any decisions.