TORONTO (Reuters) - The Canadian dollar weakened to a two-month low against the greenback on Wednesday ahead of a speech by a Bank of Canada official that could address the economic threat of China’s coronavirus outbreak, while domestic data showed higher exports.
Canada posted a smaller-than-expected trade deficit of C$370 million in December as the value of exports increased 1.9%, led by crude oil.
The rise in exports, which follows data on Friday showing surprise growth in Canada’s economy in November, could temper concern at the Bank of Canada about a recent slowdown in the domestic economy. Last month, Bank of Canada Governor Stephen Poloz said the door was open to an interest rate cut should the slowdown persist.
“The economy may have been on a slightly better footing around the turn of the year than had been feared,” said Ryan Brecht, a senior economist at Action Economics.
Bank of Canada Senior Deputy Governor Carolyn Wilkins, seen by some market players as a leading candidate to replace Poloz when he steps down in June, is due to speak this afternoon on central banking in a slow-growth world. The central bank will release her prepared remarks at 12:15 ET (1715 GMT).
At 9:56 a.m. (1456 GMT), the Canadian dollar CAD=D4 was trading 0.1% lower at 1.3294 to the greenback, or 75.22 U.S. cents. The currency, which has fallen 2.3% since the start of the year, touched its weakest intraday level since Dec. 3 at 1.3304.
The decline for the loonie on Wednesday came despite reports of a treatment to fight the coronavirus that helped boost stocks .WORLD globally and the price of oil, one of Canada’s major exports. U.S. crude oil futures CLc1 were up 3% at $51.10 a barrel.
The Canadian dollar will climb over the coming year, recouping much of its recent decline, as the economic threat from the virus outbreak in China likely fades, and some analysts do not expect the Bank of Canada to cut interest rates in 2020, a Reuters poll of analysts showed.
Canadian government bond yields were higher across a steeper yield curve in sympathy with U.S. Treasuries. The 10-year yield CA10YT=RR, which on Monday hit a near four-month low at 1.252%, was up 4.5 basis points at 1.378%.
Reporting by Fergal Smith; Editing by Steve Orlofsky