US Dollar Index, Canadian Dollar, and Australian Dollar Fell
Canadian dollar is near a 13-year low
The US dollar-Canadian dollar currency pair is inversely related to the Canadian dollar. It was on a positive bias on January 15, 2016. The currency pair rose by 1.2% for the day. The currency pair was lurking near 13-year highs. It went to a high of 1.4554 before closing the day at 1.4540. The pair was at 1.3849 at the beginning of the new year. Since then, it rose every trading day. The downturn in the Canadian dollar is primarily attributed to sliding oil prices.
Crude oil falls to a 12-year low
The Canadian dollar is a highly commodity-driven currency with a strong positive correlation to crude oil prices. Canada is a major oil exporter. The fall in crude prices below $30 took a toll on the currency. It didn’t strengthen in the manufacturing sector. This will likely put more pressure on the Bank of Canada to cut the interest rates to boost the economy. This will be negative for the currency.
Impact on the market
The iShares MSCI Canada ETF (EWC) continued on a negative trend. It fell by 3.4% on January 15, 2016. The Guggenheim CurrencyShares Canadian Dollar ETF (FXC) was also trading on a negative note. It fell by 1.2%.
Canadian ADRs (American depositary receipts) trading in the US markets were on a negative bias after crude prices continued to fall. Canada-based ADRs including Canadian Natural Resources (CNQ) and Suncor Energy (SU) fell by 6.6% and 4.7%, respectively, on January 15, 2016. Royal Bank of Canada (RY) also fell by 4.7%.
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