October 26, 2018 / 1:33 PM / in 24 days

Canadian dollar sinks to 6-week low as oil, stock prices slide

TORONTO (Reuters) - The Canadian dollar weakened to its lowest in more than six weeks against its U.S. counterpart on Friday, as oil and stock prices declined and data showing stronger-than-expected growth in the U.S. economy boosted the greenback.

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto, Ontario, Canada, January 23, 2015. REUTERS/Mark Blinch/File Photo

World stocks slid lower and were set to post their biggest weekly losing streak in more than five years, as anxiety over corporate profits added to fears about global trade and economic growth.

Canada runs a current account deficit and exports many commodities, including oil, so its economy could suffer if the flow of trade or capital slows.

The price of oil headed for a third weekly loss after Saudi Arabia warned of oversupply, while a slump in stock markets and concerns about trade clouded the outlook for fuel demand.

U.S. crude CLc1 prices were down 0.8 percent at $66.78 a barrel.

The U.S. dollar .DXY neared a two-month high after the U.S. Commerce Department reported that gross domestic product increased at a 3.5 percent annualized rate in the third quarter.

At 9:03 a.m. (1303 GMT), the Canadian dollar CAD=D4 was trading 0.5 percent lower at 1.3141 to the greenback, or 76.10 U.S. cents. The currency’s strongest level of the session was 1.3072, while it touched its weakest since Sept. 11 at 1.3154.

For the week, the loonie was on track to decline 0.4 percent despite an interest rate hike from the Bank of Canada.

The central bank on Wednesday raised its key interest rate by 25 basis points to 1.75 percent, its fifth hike since July 2017, and said it might speed up the pace of future hikes given that the economy was running at almost full capacity and did not need any stimulus.

Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. Core sovereign debt markets have been boosted this week by demand for safe-haven assets.

The two-year CA2YT=RR rose 4.5 Canadian cents to yield 2.289 percent and the 10-year CA10YT=RR climbed 33 Canadian cents to yield 2.412 percent.

The gap between the two-year and 10-year yields narrowed by 1.7 basis points to a spread of 12.3 basis points, its smallest since October 2007.

Reporting by Fergal Smith; Editing by David Gregorio

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