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By Fergal Smith
TORONTO (Reuters) – The Canadian dollar weakened to a one-week low against its U.S. counterpart on Wednesday as commodity-linked currencies broadly lost ground and domestic data showed the trade surplus narrowing in February.
The loonie was trading 0.5% lower at 1.2621 to the greenback, or 79.23 U.S. cents, having touched its weakest intraday level since March 31 at 1.2634.
“The commodity currencies began today’s session under pressure after overnight activity, and this theme has largely continued through the day as well,” George Davis, chief technical strategist at RBC Capital Markets said by email. “Our positioning models have shown that long positions have been built up in commodity FX over the past 3-4 weeks.”
Both the Australian and New Zealand dollars fell about 0.7%, giving back some recent gains. Like Canada, Australia and New Zealand are major commodity exporters.
Canada’s trade surplus with the world narrowed in February to C$1 billion as a global shortage of semiconductor chips hit both imports and exports, Statistics Canada said.
“Looking past the monthly gyrations, trade shipments have continued to recover and are expected to see further improvement this year as the global economy picks up the pace of recovery,” said Ryan Brecht, a senior economist at Action Economics.
The price of oil, one of Canada’s major exports, settled 0.7% higher at $59.77 a barrel, while Ivey Purchasing Managers Index data showed that Canadian economic activity expanded at its fastest pace in 10 years in March.
Analysts have raised their Canadian dollar forecasts for the coming year, expecting the currency to benefit from faster growth in the domestic economy and a potential reduction of bond-buying by the Bank of Canada.
The Canadian employment report for March, due on Friday, could offer clues on the central bank’s policy outlook.
Canada’s 10-year yield was little changed at 1.490%.
(Reporting by Fergal Smith; Editing by Jonathan Oatis and Will Dunham)