February 5, 2020 / 3:26 PM / in 2 months

CANADA FX DEBT-Canadian dollar hits 2-month low ahead of Bank of Canada speech

    * Loonie hit its weakest level since Dec. 3 at 1.3304
    * Canadian exports rise 1.9% in December
    * Price of U.S. oil increases 3%
    * Canadian bond yields rise across a steeper yield curve

    By Fergal Smith
    TORONTO, Feb 5 (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          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
         globally and the price of oil, one of Canada's major
exports. U.S. crude oil futures        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
           , 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)
  
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