By Ketki Saxena
Investing.com -- The Canadian dollar continued to weaken against its US counterpart today, although the US dollar index remained largely flat as risk sentiment rebounded and equities rallied after last week’s brutal selloff. However, lower oil prices offset the improvement in investor sentiment for the commodity-linked loonie.
At 2:15 p.m ET, the USD/CAD pair was up 0.43% in the day’s trading, at C$1.3768 to a US dollar, and with the day’s range of 1.3657 - 1.3809.
Broadly speaking, however, risk appetite remains subdued, with markets pricing in a nearly 100% chance of a fourth successive 75 bps Fed rate hike in November, which continue to lend support to the greenback. Pressured by the expectation of a hawkish Fed, Major Wall Street indices remain close to bear market territory.
Analysts at Scotiabank (TSX:BNS) noted that “The CAD retains a very tight, positive correlation with US equities at present and weak risk appetite seems likely to persist while inflationary pressures are elevated and geo-political tensions are high.”
The Scotia analysts raised their forecast for the pair, “Marking the Q4 forecast for USD/CAD to 1.35 (from 1.30) and lifting the 2023 profile for the USD somewhat.”
The broader risk-off sentiment meanwhile weighed on the loonie, as well as crude prices, pressuring the Canadian currency. In addition to worries of a deeper global downturn, crude prices fell today after China delayed key economic data, leading traders to bet on a slowdown and reduced crude demand in the behemoth economy.
The Biden administration also announced plans to sell oil from the Strategic Petroleum Reserve before next month's congressional elections, further pressuring the commodity.
Up next for the pair, focus will remain on the Canadian consumer inflation figures due Wednesday.