Canadian dollar slips as oil prices fall on China virus scare

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

NEW YORK (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Friday, lingering close to the one-month low hit in the previous session, as the coronavirus outbreak weighed on oil prices and amid broad-based strength for the U.S. currency.

The price of oil, one of Canada’s major exports, fell more than 2% on Friday and headed for a steep weekly decline over concerns that the coronavirus will spread farther in China, the world’s second-largest oil consumer, curbing travel and oil demand.

At 3 p.m. EST (2000 GMT), the Canadian dollar CAD=D3 was trading down about 0.12% at 1.3141 to the greenback, or 76.10 U.S. cents.

On Wednesday, the loonie came under pressure after the Bank of Canada (BoC) left its benchmark interest rate on hold at 1.75% as expected but said a future cut was possible should a recent slowdown in domestic growth persist.

“We’ve seen before how BoC meetings can result in lengthy trends for USD/CAD, lasting at least until the next BoC meeting. I think we may well have one of those scenarios now as well, so I wouldn’t necessarily fade the move at this point,” Marshall Gittler, chief strategist at ACLS Global, said in a note.

The loonie has fallen about 1% since the start of the year after climbing 5% in 2019, when it was the top-performing G10 currency.

Canadian retail sales were up 0.9% in November from October at C$51.48 billion ($39.19 billion), on stronger sales at motor vehicle and parts dealers, as well as food and beverage stores, Statistics Canada said on Friday.

“(The) rise in retail sales will come as a relief to the Bank of Canada and supports our view that it will leave interest rates unchanged this year,” said Stephen Brown, senior Canada economist at Capital Economics.

Canadian government bond prices were higher across the maturity curve, with the two-year CA2YT=RR price up 6.5 Canadian cents to yield 1.486% and the benchmark 10-year CA10YT=RR rising 43.2 Canadian cents to yield 1.367%.

Reporting by Saqib Iqbal Ahmed; Editing by David Gregorio and Jonathan Oatis