By Ketki Saxena
Investing.com -- The Canadian dollar continued to weaken against its US counterpart today, hit by a triple whammy of waning risk appetite, lower crude prices, and yesterday's pause from the Bank of Canada.
The risk-sensitive loonie was pressured by risk-off sentiment reflected in equities, with megacap tech stocks leading the decline.
The commodity-linked Canadian currency was also pressured by crude prices, after data showed China's imports and exports fell in August, with worries of a demand destruction scenario from the world's top crude importer remaining at the forefront.
The Bank of Canada's pause on interest rates yesterday also continued to serve as a headwind for the loonie, with bets rising that the Canadian central bank has now reached its terminal rate.
Markets appeared to shrug off commentary from BoC Governor Tiff Macklem that "Monetary policy is not yet restrictive enough to restore price stability", with the loonie showing little reaction to the news.
Meanwhile, the US dollar continued to dominate after US jobless claims fell below estimates, raising bets that the Fed has room to be more aggressive as the US economy (unlike the Canadian economy) continues to remain resilient.
Markets are now pricing in a nearly 50% chance of another 25 bps move from the Fed in November.
Looking ahead for the pair, analysts have cut bullish bets on the CAD in the near term as the Chinese economy weakens and the Canadian vs. US yield differential widens.
The median forecast of nearly 40 foreign exchange analysts surveyed by Reuters is for the loonie to strengthen 1.9% to 1.34 per US dollar, or 74.63 U.S. cents, in three months. This compared to forecasts for the loonie at 1.32 per USD in last month's forecast.