TORONTO: The Canadian dollar weakened on Tuesday to a nearly three-week low against its U.S. counterpart, pressured by a loss of risk appetite and domestic data showing an unexpected trade deficit. Following three consecutive months of surpluses, February’s C$972 million deficit compared with economists’ expectations for a surplus of C$500 million. Exports tumbled by the most in nearly a year, dampened by a decrease in shipments of aircraft and canola. The drop in exports will embolden the Bank of Canada to not put too much weight on a recent strong run of domestic data when it makes its interest rate decision next week, said Nick Exarhos, economist at CIBC Capital Markets. “They are likely to continue to highlight that we are starting from a position of economic slack. Risk aversion helped support the yen at the expense of commodity-linked currencies, such as the Canadian dollar, that tend to underperform when investors turn less optimistic about the economic outlook.
Appetite for risk has been curtailed by market nerves ahead of a meeting between U.S. President Donald Trump and Chinese President Xi Jinping and following Monday’s suspected suicide bombing in St. Petersburg, Russia. At 9:21 a.m. ET (1321 GMT), the Canadian dollar CAD=D4 was trading at C$1.3451 to the greenback, or 74.34 U.S. cents, weaker than Monday’s close of C$1.3386, or 74.70 U.S. cents. The currency’s strongest level of the session was C$1.3374, while it touched its weakest since March 15 at C$1.3455.
