By Anneken Tappe, MarketWatch

Canadian dollar hits a nearly 1 1/2 -year low against the buck

The U.S. dollar weakened further as risk appetite continued to wane during Thursday trading after the arrest of an executive of Chinese telecommunications firm Huawei Technologies, at the request of the U.S., sparked new worries about U.S.-China relations.

Huawei CFO Meng Wanzhou was arrested (http://www.marketwatch.com/story/huawei-cfo-arrested-in-canada-at-us-request-for-allegedly-breaking-iran-sanctions-2018-12-05) in Vancouver, Canada, for allegedly violating sanctions against Iran. Chinese authorities have demanded her release, saying she didn't violate U.S. or Canadian law.

While the U.S. and China seemed to approach a resolution of their trade spat following the G-20 summit last weekend, market hopes are now shaken. Most recently, market participants had also grown cautious of the fact that few details of a potential deal were known after President Donald Trump and Chinese Premier Xi Jinping met at the G-20.

"The latest wave of risk-off attack began at the open of futures [late Sunday] amid the announcement of Canada's arrest of Huawei's chief financial officer on behalf of the U.S.," wrote Adam Button, currency analyst at Intermarket Strategy, adding that it undid the work of any trade deal being done between China and the U.S., which was now reflected in the markets.

See:The Huawei Arrest: An Unexpected Threat to Trade Talks (https://www.marketwatch.com/video/the-huawei-arrest-an-unexpected-threat-to-trade-talks/F6048B9D-F8CE-4BD3-8B19-430C7C45937F.html)

U.S. stocks dropped (http://www.marketwatch.com/story/dow-futures-off-300-points-as-arrest-of-huawei-exec-reignites-trade-worries-2018-12-06) as sentiment deteriorated, with the Dow Jones Industrial Average dropped some 500 points at the open.

The ICE U.S. Dollar Index was down 0.5% at 96.580. The buck's main rival, the , strengthened in lock step, last up 0.6% at $1.1408.

Don't miss:Why currency experts expect the dollar to struggle in 2019 (http://www.marketwatch.com/story/why-currency-experts-expect-the-dollar-to-struggle-in-2019-2018-12-06)

The Australian dollar -- a proxy for China and global growth -- had started session as the worst performing among development-market currencies, as market participants expect U.S.-China trade relations to remain on edge following the arrest, but recovered slightly as the dollar took a dive. One Australian dollar bought $0.7232, down 0.5%, compared with its session-low of $0.7192.

On Wednesday, the Aussie had been sharply lower versus the buck, as its third quarter gross domestic product print underperformed (http://www.marketwatch.com/story/dollar-trapped-in-tight-range-as-major-currencies-retrace-recent-patterns-2018-12-05) expectations.

Traditional haven currencies had a field day on the back of the trade concerns, and the U.S. dollar dropped against both the Japanese yen and Swiss franc , last buying Yen112.28 and 0.9899 franc, both down 0.8%, according to FactSet.

Wednesday's U.S. economic reports are due along with those on Thursday, following Wednesday's day of mourning for former President George H.W. Bush's death. The data deluge included weaker private payrolls (http://www.marketwatch.com/story/us-adds-179000-private-sector-jobs-in-november-adp-2018-12-06) in November, a widened trade deficit of $55.5 billion (http://www.marketwatch.com/story/us-trade-deficit-climbs-to-10-year-high-despite-tariffs-tough-trump-stance-2018-12-06) at a 10-year high, but also a stronger-than-expected ISM nonmanufacturing index (http://www.marketwatch.com/story/ism-service-index-registers-second-strongest-reading-in-13-years-2018-12-06).

Bank of Canada Gov. Stephen Poloz reiterated the central bank's worry over global oil prices and what a slowdown in the global economy could mean for oil demand. On Wednesday, the BOC kept its interest rates unchanged but warned of slowing momentum in Canada's economy (http://www.marketwatch.com/story/canadian-dollar-tumbles-to-6-month-low-after-bank-of-canada-keeps-interest-rates-on-hold-2018-12-05) on the back of the drop in oil prices and lower business investments related to trade worries over the summer.

Versus the Canadian dollar , the greenback was stronger, last buying C$1.3421, up 0.5%. The loonie, as the Canadian currency is also known, has dropped to its lowest level since June of 2017 after hitting a six-month low on Wednesday, according to FactSet data.

In European currencies, the British pound edged higher once again, as investors become cautiously optimistic that the chance of a hard Brexit is diminishing. Sterling last fetched $1.2785, compared with $1.2735.

Check out:Theresa May absorbed three sharp blows Tuesday as steward of U.K.'s Brexit process (http://www.marketwatch.com/story/what-mays-losses-in-parliament-and-the-european-courts-vote-mean-for-brexit-2018-12-04)

(END) Dow Jones Newswires

December 06, 2018 10:52 ET (15:52 GMT)