By Ketki Saxena
Investing.com – The Canadian Dollar weakened to a near four week low against its US counterpart today on weak risk appetite, and as domestic economic data came in weaker than expected.
Canada's Trade Balance for November fell from $3.2 billion in October to $1.57 billion in November, coming in below expectations. Canadian Building Permits also fell more than expected in November, posting a decline of 3.9% compared to forecasts for a 1.7% decline.
The commodity-linked loonie meanwhile gained little support from crude prices, which clawed back yesterday’s declines, but remained flat on the week.
Analysts at Scotiabank (TSX:BNS) note, “Generally, soft commodities and slack terms of trade are working against the CAD at the same time. These factors are tilting risk towards a slightly (at least) softer CAD.”
The risk-sensitive loonie was also pressured by uncertain risk sentiment ahead of key US CPI data.
The US dollar meanwhile strengthened against a basket of major currencies, with uncertain risk sentiment ahead of Thursday’s US CPI data boosting demand for safe haven greenback. Rising US Treasury yields also helped boost the USD.
Looking ahead, Scotiabank analysts believe that USD/CAD looks undervalued relative to an equilibrium estimate of 1.3486. They also note seasonal trends seem to be poised against the loonie.
“Seasonality (January is the second-best month of the year for USDCAD in terms of average monthly returns since the 1990s) also leans towards the risk of some additional USD strength in the next few weeks.”