By Fergal Smith
TORONTO (Reuters) – The Canadian dollar weakened to a 12-week low against its U.S. counterpart on Tuesday as oil prices fell and investors weighed rising domestic political uncertainty.
The loonie was trading 0.2% lower at 1.3915 per U.S. dollar, or 71.86 U.S. cents, after touching its weakest intraday level since Aug. 5 at 1.3929. Since late September, the currency has weakened 3.6%.
“Markets dislike uncertainty, and right now, the political landscape is quite unpredictable,” said Tony Valente, senior FX dealer at AscendantFX.
“I’m not referring to next week’s U.S. election, but rather the instability surrounding the Trudeau government … This uncertainty seems to be weighing on the domestic currency.”
The leader of Canadian opposition party Bloc Quebecois said he was working to topple Prime Minister Justin Trudeau’s minority Liberal government but to do so he needs the help of other legislators who have shown little enthusiasm for the idea.
The price of oil, one of Canada’s major exports, added to the previous day’s sharp decline on a report that Israeli Prime Minister Benjamin Netanyahu will hold a meeting for a diplomatic solution to the war in Lebanon. U.S. crude oil futures settled 0.25% lower at $67.21 a barrel.
Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers were due to appear before the House of Commons Standing Committee on Finance at 15:30 ET (1930 GMT). Last Wednesday, the central bank cut its benchmark interest rate by an unusually large half a percentage point to support the economy.
Canadian government bond yields were little changed across the curve. The 10-year was trading at 3.270% after earlier touching its highest level since July 26 at 3.320%.
(Reporting by Fergal Smith; Editing by Alistair Bell)