The Canadian dollar fell to a three-week low against the U.S. dollar on Thursday, knocked lower by weaker commodity prices and lingering uncertainty about global trade after President Donald Trump earlier said that the United States wants to negotiate bilateral deals with Canada and Mexico.
Trump roiled markets again on Thursday when he voiced his concerns about a strong dollar and the U.S. Federal Reserve’s interest rate increases.
His comments caused a stir in the currency market, initially pushing the greenback off a one-year peak against a basket of major currencies.
The impact on the Canadian dollar was brief, however, as the loonie pared some of its losses.
In late trading, the U.S. dollar was still up 0.8 percent against the Canadian currency to $1.3270 , after earlier hitting a three-week peak of $1.3290. So far this year, the Canadian dollar has struggled, falling 5.5 percent against the greenback.
Against a basket of six major currencies, the U.S. dollar rebounded to a gain of 0.2 percent to 95.25 .
Lower commodity prices weighed on the Canadian currency, analysts said, as precious metals prices were down with gold and silver on the defensive.
Benchmark Brent crude oil was also lower, ending the session down 0.5 percent at $72.55 per barrel.
Brent has fallen almost 9 percent since last week, when it reached a high above $79 on emerging evidence of higher production from Saudi Arabia and other OPEC producers.
Global trade issues, meanwhile, remained a headwind for the Canadian dollar.
A day after Trump said he may negotiate separate trade deals with North American Free Trade Agreement (NAFTA) partners Mexico and Canada, Canada’s Ambassador to the United States David MacNaughton said he was confident that talks to modernize NAFTA would maintain the trilateral nature of the pact.
Daniel Katzive, head of North America FX strategy, at BNP Paribas said he expects global trade tensions to get worse before they get better, which should support the U.S. dollar in the next quarter. He expects the greenback to hit $1.35 against the Canadian dollar by the end of the third quarter.
Meanwhile, Canadian government bond prices rose and yields fell, tracking the U.S. Treasury debt market.
The two-year yield fell to 1.931 percent, compared with 1.953 percent late on Wednesday, while the 10-year was down at 2.109 percent from Wednesday’s 2.149 percent.
The spread between the U.S. benchmark 10-year Treasury note and Canadian 10-year yields narrowed slightly on Thursday to 73.57 basis points . The yield gap, however, has widened since the beginning of the year in favor of the U.S. dollar.