The Canadian dollar is paring its earlier losses against its American counterpart on Thursday, buoyed by rallying energy prices and a smaller current account deficit. The loonie has weakened nearly 1% over the last trading week, mainly because of the bear market in international crude oil markets.
According to Statistics Canada, the national current account deficit tumbled to $10.34 billion in the third quarter of this year, down from a revised $16.68 billion deficit in the previous quarter. This is lower than the market forecast of $11.5 billion.
Investors are cheering on the news because the improvement has led to better prices for Canadian exports. Ottawa maintains a current account deficit, so the economy could take a hit should the global flow of capital or trade stumbles.
Despite starting off the trading session lower, the loonie has rebounded thanks to the rally in energy prices. January West Texas Intermediate (WTI) crude futures advanced $1.36, or 2.7%, to $51.65 per barrel on the New York Mercantile Exchange. Crude remains one of Canadaâs biggest exports.
Earlier this week, Alberta announced that it plans to purchase rail cars and locomotives to transport 120,000 barrels per day (bpd) to refineries to alleviate the crude glut. However, opponents say the province would be better off if it slashes production levels.
The recent decline in oil prices may give the Bank of Canada (BOC) pause on raising interest rates. The market has been expecting the central bank to pull the trigger on another rate hike in December, but the drop in crude may prevent it from happening.
Traders will now look ahead to Fridayâs gross domestic product (GDP) numbers for the third quarter. Analysts project that there will be a 0.25% expansion in the July-to-September period.
Markets will also keep an eye on the G20 summit to determine if there will be any improvements in US-China trade negotiations. There was also big news that President Donald Trump canceled a planned meeting with Russian President Vladimir Putin.
The USD/CAD currency pair rose 0.05% to 1.3282, from an opening of 1.3275, at 16:44 GMT on Thursday. The EUR/CAD jumped 0.09% to 1.5103, from an opening of 1.5102.
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