US dollar edged higher against its Canadian counterpart on Tuesday, as crude oil, Canadas largest export, traded close to its lowest level in almost five months, but however, greenbacks gains seemed capped due to mounting expectations that the Federal Reserve will delay tapering of its monetary stimulus probably until early next year.
USD/CAD touched a session high at 1.0449 at 12:25 GMT, after which consolidation followed at 1.0441, gaining 0.12% for the day. Support was likely to be received at November 7th low, 1.0404, while resistance was to be met at November 15th high, 1.0485.
Canadian dollar lost ground against 13 out of 16 major peers on speculation that Fed Chairman Bernanke, alongside other Fed speakers, may reiterate that US economic growth was not sufficiently strong, so that the central bank could begin tapering of its bond purchases.
Federal Reserve Chair-nominee Janet Yellen said in front of the Senate Banking Committee on Thursday last week that as US economy was beginning to show progress, rates of inflation and unemployment still have more room to approach central bank’s objectives. Global markets considered such comments as rather dovish, as it seemed Fed policymakers wanted further solid proof of economic improvement before making a move towards reduction of monthly monetary stimulus.
A survey of experts has already showed that a possible scale back may occur at banks policy meeting on March 18th-19th. These events are of a certain importance for the Canadian dollar, as the United States represents Canadas largest export market.
At the same time, futures on crude oil were losing 0.33% on a daily basis, trading at 93.37 at 14:52 GMT, after on November 14th they slid to 92.51, or the lowest level since June 4th. The discount for the benchmark Western Canada Select crude oil grade, compared with the Western Texas Intermediate, its US rival, widened 5.7% to reach 37 USD, Bloomberg reported.
“I don’t think it’s coincidental that you’re seeing oil at one of its worst levels in a while,” said Brad Schruder, director of foreign exchange at Bank of Montreal, said by phone from Toronto, cited by the same media. “Outside of any correlated factors what you’re looking at, here is just a little bit of profit-taking. Canada did very well in the last couple of days, the movement has been very profitable if you got in at the right time.”
Meanwhile, a report showed, that the gauge of employment costs in the United States rose 0.4% during the third quarter of the year, after another 0.5% increase, registered during the preceding three months. Preliminary estimates pointed that the index will retain its rate of increase of 0.5% in Q3. Wages in the country climbed 0.3% during the third quarter. In annual terms, the employment cost index rose 1.9% in Q3.
Elsewhere, the loonie, as Canadian dollar is also nicknamed, was lower against the euro, with EUR/CAD cross up 0.11% for the day to trade at 1.4105 at 15:12 GMT. GBP/CAD pair was gaining 0.10% to trade at 1.6822 at 15:13 GMT.
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