Canadian dollar closes below 80 cents US

The Canadian dollar tumbled by three-fifths of a cent against its U.S. counterpart Monday after dipping to its lowest level in more than six weeks.

The loonie closed at 79.78 cents US, down 0.63 cents from last Friday's close. Its intraday low of 79.60 cents US was last reached on April 13.

The Canadian dollar has now fallen by more than four cents since reaching a mid-May high of 83.86 cents US.  

"U.S. releases are the key risk for [the Canadian dollar] as we consider last week's Bank of Canada statement and its optimistic tone centred on the U.S. outlook driving export-led growth," said Eric Theoret, a foreign exchange strategist at Scotiabank, in a morning commentary.

The Bank of Canada expressed optimism that the U.S. economy would start accelerating in the second half of 2015 but analysts said the central bank also implied that a stronger Canadian currency would weaken the bank's outlook on the economy. 

Last Friday, Statistics Canada reported that the country's GDP shrank at a worse-than-expected annual pace of 0.6 per cent in the first quarter. Analysts said the weak number makes it more likely that the central bank will move to cut interest rates again some time this year -- something that would cause the loonie to lose more value against the U.S. dollar. 

Bloomberg News reported Monday that the currency markets are placing the odds of a 0.25 per cent cut in the Bank of Canada's key rate later this year at around 60 per cent, versus 36 per cent last week.

U.S. in rate-hike mode

Adding to the negative sentiment around the Canadian dollar, the financial markets expect the U.S Federal Reserve to hike U.S rates later this year. 

Just as a rate cut in Canada would push the loonie lower, so too would a rate hike in the U.S. push the greenback higher.

"A series of strong data releases this week could further increase the momentum the [U.S. dollar] has had of late, leading up to the June 17 [Federal Reserve U.S. interest rate] decision," said Rahim Madhavi of Knightsbridge Foreign Exchange. 

Crude oil prices cooled on Monday -- another frequent negative for the loonie. A key oil benchmark at one point fell below $60 US a barrel on expectations that OPEC production levels would remain high. The July futures contract for light sweet crude eventually settled down 10 cents at $60.20 US.