The Canadian dollar drifted weaker on Monday morning in New York as the price of crude oil, Canada's crucial export, was slipping ahead of this week's key economic data from the U.S. and China and comments by the Federal Reserve chairman.
Light Sweet Crude Oil (WTI) futures for July delivery, the most actively traded contract, shed $0.49 to $95.80 per barrel. Last week, oil settled flat after some upbeat macroeconomic data out of the U.S. strengthened the US dollar versus a basket of currencies.
The dominating factor at the moment is the strengthening of the U.S. dollar as signs of an improving U.S. economy led to speculation that the Federal Reserve is close to winding down its massive bond-buying program earlier than expected.
Elsewhere, the Japanese government upgraded its assessment of the economy for the first time in two months, as a weak yen helped revive the country's exports and factory output.
"The Japanese economy is picking up slowly," the Cabinet Office said in its May monthly report. This was an upgrade from previous month's assessment when it said that economy was showing "signs of picking up while weakness can be seen in some areas."
Exports are showing signs of picking up and industrial production is slowly gathering pace, today's report said. The government expects economic recovery to resume gradually, supported by improvement in confidence and export conditions as well as due to the effects of the fiscal and monetary policies.
At the same time, leading indicator for Japan's economic activity was revised up to show an increase in March from a month earlier, final data released by the Cabinet Office showed today.
The leading economic index rose to 97.9 in March from 97.4 in February. The readings for both March and February have been revised from an earlier score of 97.6 and 97.7 respectively.
Meanwhile, the coincident economic index, which measures the current economic situation, rose to 93.8 in March from 92.5 in the previous month. The March reading was higher than previously reported.
Investors await Fed Chairman Ben Bernanke's testimony to the U.S. Congress on Wednesday and comments from other Fed presidents for signals on the prospects of stimulus policies.
The Canadian dollar dropped to 99.58 against the yen, with the pair heading towards its 11-day low of 99.16 hit at the opening session of the day. The loonie-yen pair thus depreciated almost 1.8 percent so far in the day from last week's fresh multi-year high of 101.04. The next probable support for the pair is seen around the 99.0 area.
The Canadian dollar also slipped to a more than 2-week low of 1.3240 against the euro around 8:00 am ET. The next bearish barrier for the Canadian currency is seen around the 1.33 level.
The loonie depreciated against the US dollar on Monday morning, falling to the proximity of 1.03 around 7:55 am ET. Further bearish extension could lead the currency challenging the 1.0310 support level in the near-term.
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