U.S. dollar trades in a tight range, as Canada’s loonie gets slammed

Major currencies retraced some of Tuesday’s action in early Wednesday trading, as investors processed President Donald Trump’s latest comments on China trade. Meanwhile, the Canadian dollar dropped to a six-month low versus its U.S. rival, following a Bank of Canada policy update.

While it was expected for the BOC to keep its benchmark interest rates unchanged — with the overnight rate at 1.75% — the central bank’s comments on an anticipated loss of economic momentum in the fourth quarter, as well as weaker oil prices














CLF9, -0.86%












threw the Canadian dollar














USDCAD, +0.6935%












also referred to colloquially as the loonie, into a tailspin. Reduced business investment on the back of trade tensions over the summer, impacted the outlook for the last three months of the year, the BOC said.

The greenback last bought C$1.3381, compared with C$1.3266 late Tuesday, after touching a six-month high of $1.3400 earlier.

The Australian dollar














AUDUSD, -0.8997%












 also underperformed sharply after the country’s third-quarter economic growth print came in at 2.8% on the year, below the 3.4% FactSet consensus estimate. The Aussie dollar was down 1% versus the dollar at $0.7267.

The ICE U.S. Dollar Index














DXY, +0.07%












 moved into positive territory but remained in a tight range, last up 0.1% at 97.052

“The declines in equity markets, and bond yields for that matter, on Tuesday were peculiar not so much because of direction but because of their timing, coming so abruptly and so soon after the Powell and China factors had injected relief. Yesterday’s declines on Wall Street have scarred not only equity investors, but they have bruise the FX space as well,” wrote Stephen Gallo, European head of currency strategy at BMO Capital Markets.

Read: 4 reasons why the 10-year Treasury yield has tumbled below 3%—again

The Dow Jones Industrial Average














DJIA, -3.10%












 ended 800 points lower on Tuesday, as Treasury yields slipped and investors became skeptical of the progress made in U.S.-China trade relations last weekend at the G-20 summit in Argentina.

U.S. stocks and bonds aren’t trading on Wednesday, as exchanges closed in honor of the day of mourning for late President George H.W. Bush. U.S. economic data are also delayed to Thursday.

U.S.-China trade relations remained front and center on Wednesday after tweets by President Donald Trump on Tuesday caused some turbulence.

Late Tuesday, the Caixin services purchasing managers index for China showed an expansion of the services sector in November. The index stood at 53.8, beating expectations of 50.8. Last week, investors fretted over China’s manufacturing PMI, which came in exactly on the cusp of what counts as economic growth. A reading of at least 50 indicates expansionary conditions.

In European currencies, both the British pound and euro bounced back from weaker levels late Tuesday. Sterling














GBPUSD, +0.0943%












 bought $1.2738, up 0.1%, after touching a 1 ½-year low on Tuesday. Market participants await the next developments surrounding Brexit, after two parliamentary votes and an opinion by the European Union’s highest court were considered blows to Prime Minister Theresa May’s Brexit plan.

The euro














EURUSD, +0.0000%












 last bought $1.1347, up from $1.1344 late Tuesday in New York.

Want news about Europe delivered to your inbox? Subscribe to MarketWatch’s free Europe Daily newsletter. Sign up here.