Loonie Lower on Oil Prices, Risk Aversion

The Canadian dollar is heading lower in Forex trading today, thanks to declining oil prices and an increase in risk aversion. Yesterday’s risk rally appears to be over, and concerns about what’s next for the global economy are weighing on high beta currencies like the loonie.

Because of its high amount of oil exports, the Canadian economy relies on oil prices to help keep it growing. And, of course, the Canadian dollar’s performance on the currency market is often affected by oil prices. With oil prices sliding today, it is therefore not much of a surprise that the loonie is heading lower — even after yesterday’s intraday rally.
Today, though, fears about global economic growth are taking center stage. Concerns about what is happening in the eurozone are only part of the equation. China appears to be slowing, and the US economy continues to recover at a sluggish pace. The result is concern that global growth will slow (and possibly result in a double-dip recession), and that oil demand — and oil prices — will drop as well. None of this bodes well for the Canadian dollar.
At 15:14 GMT USD/CAD is higher, rising to 1.0251 from the open at 101.72. GBP/CAD is higher as well, rising to 1.6136 from the open at 1.6023. EUR/CAD is at 1.4026 right now.

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