The Canadian dollar pared its early morning gains against the US dollar and the Japanese yen on Monday morning in New York as a retreat in crude oil prices increased the currency's selling pressure. The petro-dependent loonie thus declined from a new multi-month high against the yen and a fresh multi-day high against the buck.
Crude oil dropped again today amid demand worries with stock markets in the red. The drop took prices towards the $50 per barrel mark again. Light sweet crude for May delivery fell to $51.06, down $1.45 for the session. Prices touched as low as $50.30 in the opening moments of the session.
Oil prices rose last week as the dollar weakened and as world equity markets rallied on speculation the worst of the global recession may be over soon. Although crude oil prices have risen roughly 16 percent so far this year, they are still about 63 percent below their high of more than $147 a barrel last July.
In economic news, the Statistics Canada said in a report that Canadian building permits plunged 15.9% month-over-month, compared to the downwardly revised 6.0% decline in the previous month. Economists were expecting just a 4% decline.
The Canadian dollar dropped to 81.15 against the Japanese currency by 9:45 am ET from the early European session's multi-month high of 82.92. In near-term, the loonie is likely to target the 80.7 level.
Despite a brief pause in April 1, the loonie has been trading higher against the Japanese yen since it reached a weekly low of 76.63 on March 30. The loonie has lost around 7.6 percent against the yen since then. The loonie-yen pair that closed last week's trading near 81.5 is currently worth near 81.3.
The yen gained amid news that Japanese government intends to compile a new stimulus package worth 2% or more of gross domestic product. The Finance Minister Kaoru Yosano told reporters after meeting Prime Minister Taro Aso that new fiscal spending would exceed 10 trillion yen. Details of the third package are likely to be finalized by April 10.
Traders also chewed over data showing Japan's leading index decreased to 75.2 in February from 77.2 in the previous month. Economists expected the indicator to come in at 75.3. At the same time, Economic and Social Research Institute said that the coincident index declined to 86.8 from 89.5 in January. Economists expected a reading of 86.9.
Against the US dollar, the Canadian dollar fell to 1.2426 by 10:40 am ET from a 12-day high of 1.2228 hit in the Asian session. The greenback-loonie pair that closed last week's deals at 1.2313 is currently trading at 1.2416. On the downside, the loonie is likely to target the 1.245 level in near-term.
Before reversing direction in the early European session today, the Canadian dollar has gained around 4 percent against the dollar since it dropped near a 2-week low on April 1.
The Canadian dollar advanced to 1.6601 against the European common currency by 11:00 am ET before edging lower to 1.6692 at the start of the New York session today. The euro-loonie pair is currently worth near Friday's closing value of 1.6612.
The euro gained in early trading despite the euro-zone February retail sales decline more than expected. Euro-zone retail sales volume dropped 0.6% in February from January, a report from the Euro-stat showed Monday. Economists were expecting retail sales to drop 0.4% in February after rising 0.1% in January.
Another report released by the Euro-stat showed that euro-zone producer price index dropped 1.8% year-over-year in February, after falling 0.7% in January. Economists were looking a decline of 1.5%. In December, producer prices were up 1.1%.
Elsewhere, the Sentix investor confidence for the euro area improved to minus 35.26 in April from minus 42.67 recorded in March. Economists had expected a reading of minus 40.4 for April.
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