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(Bloomberg) — The Canadian dollar slid to its lowest level since December on Tuesday, as traders anticipated the Bank of Canada will be slower than its global peers to raise interest rates.
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The loonie slumped to 1.3969 against the US dollar, marking the lowest level of the year. The declines came as prices for oil — a key Canadian export — slumped below $90 per barrel. Market participants were also wagering that the country’s central bank will keep its key rate on hold when it announces its latest policy decision on Wednesday.
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“The Bank of Canada decision presents modest dovish risks for the loonie,” said Pat Locke, a currency strategist at JPMorgan Chase & Co. “We are content to run short loonie trades against the US dollar,” he said.
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All 27 economists polled by Bloomberg saw Canada’s central bank keeping rates on hold at 2.25%, more than a full percentage point below the Fed’s benchmark. The central bank said its rate “looks appropriate” after its April 29 meeting.
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The Canadian dollar has tumbled more than 2% versus the greenback since then, making it the biggest loser among its Group-of-10 peers. Two-year US Treasury yields have climbed about 11 basis points so far in June, out-pacing the rise of 7 basis points in Canadian yields of the same tenor.
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Speculators have raised their short bets against the Canadian dollar for the past three weeks, according to Commodity Futures Trading Commission data. At Monday’s close, a key options gauge on the currency’s outlook was at its most bearish level since March 30.
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