By Commodity News Service Canada
WINNIPEG, September 2 – The Canadian dollar was sharply weaker relative to the US dollar on Tuesday, losing nearly half a cent.
Expectations that the Bank of Canada will continue to keep interest rates unchanged at Tuesday’s policy announcement helped to weigh on the currency, analysts said.
The Canadian dollar closed at US$0.9149 or US$1=C$1.0930 on Tuesday, which compares with Friday’s North American settlement of US$0.9197 or US$1=C$1.0873. Canadian and U.S. markets were closed on Monday for Labour Day.
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News that China’s purchasing managers index unexpectedly fell to 51.1 in August was also bearish. The private sector measure also unexpectedly fell to 50.2, reports show.
Spillover pressure from the weakness seen in commodity prices, including sharp losses in both gold and crude oil, further undermined the loonie.
However, positive Canadian economic data was supportive. The RBC Canadian manufacturing purchasing managers’ index rose to 54.8 in August, from 54.3 in July. That marked the fastest improvement since November 2013.
Canadian bonds ended lower on Tuesday, following the same action seen in the US Treasury market, participants said.
The two-year bond yielded 1.124% late Tuesday, from 1.104% late Friday. The 10-year bond yielded 2.087%, from 1.999%. Bond yields fall as their prices rise.
