February 3, 2020 / 8:34 PM / 5 months ago

CANADA FX DEBT-Loonie slides to 2-month low as China virus hits oil demand

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar weakens 0.4% against the greenback
    * Canadian PMI rises to 50.6 in January
    * Price of U.S. oil decreases 2.9%
    * Canadian bond yields fall across a flatter yield curve

    By Fergal Smith
    TORONTO, Feb 3 (Reuters) - The Canadian dollar fell to a
two-month low against its broadly stronger U.S. counterpart on
Monday as evidence emerged that China's coronavirus outbreak is
slashing demand for oil, one of Canada's major exports.
    At 2:54 p.m. (1954 GMT), the Canadian dollar          was
trading 0.4% lower at 1.3292 to the greenback, or 75.23 U.S.
cents. The currency, which fell 1.9% in January, touched its
weakest intraday level since Dec. 3 at 1.3302.        
    "The loonie continues to slide along with crude oil prices
due to reports of substantial demand shocks coming from China,"
said Simon Harvey, FX market analyst for Monex Europe and Monex
Canada.
    As the virus outbreak hits fuel demand in China, the world's
biggest crude oil importer, refiner Sinopec Corp           told
its facilities to cut throughput this month by about 600,000
barrels per day, or 12%, the steepest cut in more than a decade.
U.S. crude oil futures        were down 2.9% at $50.06 a barrel.
             
    The current price of oil is about $10 lower than the Bank of
Canada assumed in its economic forecasts last month, when it
opened the door to an interest rate cut. Money markets see about
a 60% chance that the central bank would ease by April.
          
    "The external risks facing the Bank of Canada have reared
their heads in the repackaged form of a slowing Chinese
economy," Harvey said.
    Canadian manufacturing activity expanded in January for the
fifth straight month but the pace of growth remained sluggish.
The IHS Markit Canada Manufacturing Purchasing Managers' index
rose to a seasonally adjusted 50.6 in January from 50.4 in
December.            
    Canadian trade data for December is due on Wednesday, while
the January jobs report is awaited on Friday.        
    The U.S. dollar        climbed against a basket of major
currencies, helped by data showing that U.S. manufacturing
activity rebounded in January.             
    Canadian government bond yields fell across a flatter yield
curve, with the 10-year yield down 1.2 basis points at 1.261%.
On Friday, it touched its lowest intraday level since Oct. 8 at
1.257%.

 (Reporting by Fergal Smith
Editing by Paul Simao and Nick Zieminski)
  
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