Canadian dollar hits 1-week low as equity markets slide

FILE PHOTO: A Canada Dollar note is seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration/File Photo

TORONTO (Reuters) - The Canadian dollar fell for the third straight day against the greenback on Thursday, as surging COVID-19 infections weighed on investor sentiment and a senior Bank of Canada official said the level of economic activity that Canada can sustain must rise.

The Canadian dollar CAD= was trading 0.6% lower at 1.3135 to the greenback, or 76.13 U.S. cents, having touched its weakest intraday level since last Thursday at 1.3149.

“CAD seems to be following equities fairly closely, so the weakness we’re seeing in risk sentiment is probably weighing on the loonie,” said Erik Nelson, a currency strategist at Wells Fargo in New York.

Wall Street lost ground after New York became the latest state to introduce social distancing restrictions to help contain the virus and investors weighed the timeline of the mass rollout of an effective vaccine.

Canada runs a current account deficit and is a major producer of commodities, including oil, so the loonie tends to be sensitive to the global flow of trade and capital.

U.S. crude oil futures CLc1 settled 0.8% lower at $41.12 a barrel, pressured by an unexpected rise in U.S. crude stockpiles.

After the COVID-19 pandemic, Canada will need to focus on creating sustainable growth that does not leave people behind in order to make higher levels of debt more manageable, a senior Bank of Canada official said on Thursday.

Canadian government bond yields were lower across a flatter curve in sympathy with U.S. Treasuries. The 10-year CA10YT=RR fell 5 basis points to 0.723%, extending its pullback from a seven-month high on Tuesday at 0.803%.

Reporting by Fergal Smith; Editing by Nick Zieminski and Jonathan Oatis