The Canadian Dollar weakened significantly against the U.S. Dollar, trading down to a level not seen since July of 2009. The decline in the rate totaled -2.9% yesterday and another -1.2% today.

The sharp decline was in part due to risk appetite favoring more stable currencies than commodity based currencies such as the Loonie, along with a sharp decline in oil prices. Oil is Canada’s largest export. Also pressuring the rate were expectations of the Federal Reserve beginning to raise interest rates sometime next year.

Oil prices seem to be the catalyst for this recent downward move in the Loonie however. Yesterday, the crude oil futures contract for November delivery declined -$3.90 to USD $81.84 per barrel, the lowest level for crude since June of 2012. Also, the International Energy Agency cut its oil demand growth forecast by one fifth due to weaker growth.

A decline in Canadian bond yields also weighed on the currency, with the yield on the two year Canadian government bond falling below 1 percent to its lowest level since February. The two-year government bond was up +13 cents to yield 0.985%, while the benchmark 10-year rose +53 cents yielding 1.950 percent, its lowest yield since May of 2013.

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