Commodities are taking a plunge today, and commodity currencies like the Canadian dollar are falling right along with them. Loonie is especially impacted by the drop in oil prices.
Commodity prices are much lower as the US session moves into mid-morning trading. Gold has dropped below $1,400 an ounce, and oil prices are heading toward $88 a barrel. This bad news for commodities is weighing on currencies, like the Canadian dollar, that are tied to commodities.
Loonie is being especially affected by lower oil prices. Oil is Canada’s biggest export, and the drop in prices is having a big effect, especially against the US dollar.
General risk aversion is dominating all markets today, including equities. Forex traders are reluctant to invest in high beta currencies and commodity currencies, and that is weighing on the loonie quite a bit.
The future might see a different result, especially if all the recent stimulus in Europe and the United States spurs inflation, but for now the fear is driving the markets, and that means a preference for less risky assets. The loonie just doesn’t fit that bill today.
At 13:39 GMT USD/CAD is up to 1.0203 from the open at 1.0144. EUR/CAD is up to 1.3350 from the open at 1.3306. GBP/CAD is up to 1.5626 from the open at 1.5566.
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