Canada’s dollar weakened versus its U.S. counterpart on concern the global recovery is slowing after China reported its biggest trade deficit in more than two decades, sapping demand for higher-risk assets.
Canada’s dollar staged its biggest five-day rally since October after central banks including the Bank of Canada took steps this week to make it cheaper for lenders to borrow dollars during emergencies.
The record pace of foreign purchases of Canadian government bonds so far this year may cool as the central bank moves ahead with interest-rate increases, according to Royal Bank of Canada and Bank of Nova Scotia.
Canada’s consumer prices advanced less than forecast in November as cost increases for energy and food moderated, giving the Bank of Canada scope to hold interest rates steady until the second quarter of next year.
Canada’s annual inflation rate accelerated in April, and retailers saw sales increase at the fastest pace in five years, giving the central bank more scope to begin raising interest rates as soon as next month.
Canada’s dollar dropped to the lowest level in almost three weeks as concern Italy may become the latest European nation in need of a financial bailout drove investors to the safety of the U.S. currrency.