Canadian dollar adds to weekly decline as oil selloff weighs

The Canadian dollar weakened against its U.S. counterpart on Friday, extending this week's decline, as oil prices sank to fresh lows for the year and investors turned cautious ahead of the Federal Reserve's interest rate decision next week.

The Canadian dollar USDCAD was trading 0.2% lower at 1.3625 to the greenback, or 73.39 U.S. cents, after moving in a range of 1.3570 to 1.3690. For the week, it was down 1.2%, its second straight week of declines.

"The major factor that is eroding the Canadian dollar is oil," said Darren Richardson, chief operating officer at Richardson International Currency Exchange Inc.

U.S. crude oil futures CL1! settled 0.6% lower at $71.02 a barrel, taking its losses for the week to roughly 11%, on growing recession fears. Oil is one of Canada's major exports.

Wall Street's main indexes have also fallen this week as investors awaited a potential 50-basis point interest rate hike by the Fed when it announces its policy decision on Wednesday.

"I think the market is now going to wait for the Fed," Richardson said. "It really is the Fed that is going to be the driving factor on rates and thus economic activity in 2023."

The Bank of Canada has said it will study the most recent economic data to gauge whether to raise its benchmark rate further after lifting it on Wednesday to 4.25%, the highest in nearly 15 years.

Canadian industries operated at 82.6% of their production capacity in the third quarter, marking the first decline in capacity utilization since the same quarter in 2021.

Canadian bond yields rose across a steeper curve, tracking the move in U.S. Treasuries.

The 10-year (CA10YT=RR) was up 6.5 basis points at 2.866% after touching on Wednesday its lowest level in nearly four months at 2.715%.