Canadian dollar extends quarterly slide as economy stalls

TORONTO, Sept 29 (Reuters) – The Canadian dollar weakened to a two-week low against its U.S. counterpart on Friday as domestic gross domestic product data showed support that the Bank of Canada has ended raising interest rates.

The loonie was trading 0.6% lower at 1.3570 a greenback, or 73.69 US cents, after touching its weakest intraday level since September 13 at 1.3576.

For the week, it fell 0.6%, while losing 0.5% in September and 2.5% in the third quarter.

„Part of this (Friday’s move) is driven by month-end flows so far and a weak GDP print,” said Biban Roy, global head of FX strategy at CIBC Capital Markets.

The data suggests that „the Bank of Canada is likely to remain at its terminal rate, and previous rate hikes are doing their job and working to slow activity.”

Canadian economic growth stalled in July as the manufacturing sector posted its biggest decline in more than two years, while a preliminary estimate showed gross domestic product rose 0.1% in August.

Money markets see a 26% chance of a rate hike in the BoC’s next policy decision on October 26, up from 31% before the data.

„You have the impact of a strong (U.S.) dollar against other currencies. You feel like the U.S. is better prepared to deal with this high-long message that you’re seeing coming out in the markets.” Roy said.

The U.S. dollar ( .DXY ) reversed its earlier decline, hovering near a 10-month high against a basket of major currencies, while oil, one of Canada’s main exports, fell 1% to $90.79 a barrel.

Canadian government bond yields fell across the curve at 4.032%, down 4.1 basis points over the 10-year.

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