February 5, 2020 / 9:12 PM / 5 months ago

CANADA FX DEBT-Loonie slips to 2-month low as recent slump in oil weighs

    * Canadian dollar declines 0.1% against the greenback
    * Loonie hits its weakest intraday level since Dec. 3 at
    * Canadian exports increase 1.9% in December
    * Canada's 10-year yield rises 5.6 basis points to 1.389%.

    By Fergal Smith
    TORONTO, Feb 5 (Reuters) - The Canadian dollar weakened to a
two-month low against its U.S. counterpart on Wednesday as the
greenback broadly climbed and a recent slump in the price of
oil, due to the coronavirus outbreak in China, weighed.
    At about $51 a barrel, after rallying on Wednesday, the
price of oil        is trading about 22% below its January peak
and $9 below the level that the Bank of Canada assumed last
month in its forecasts. Oil is one of Canada's major exports.
    The "overriding factor" pressuring the Canadian dollar has
been oil, said Mark Chandler, head of Canadian fixed income and
currency strategy at RBC Capital Markets.
    If oil were to stay at current levels it could become a
concern for the Bank of Canada, Chandler said.
    An outbreak of coronavirus that has rattled financial
markets and infected thousands in China could hurt Canada's
economy by disrupting supply chains and depressing oil prices,
Bank of Canada Senior Deputy Governor Carolyn Wilkins told a
business audience in Toronto.             
    Last month, the central bank said a future cut was possible
should a recent slowdown in domestic growth persist.
    At 3:37 p.m. (2037 GMT), the Canadian dollar          was
trading 0.1% lower at 1.3291 to the greenback, or 75.24 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
    Canada posted a smaller-than-expected trade deficit of C$370
million in December as the value of exports increased 1.9%,
official data showed. It follows data on Friday showing surprise
growth in Canada's economy in November.             
    "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.
    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.             
    Reports of a treatment to fight the coronavirus and a strong
U.S. private-sector jobs report helped boost stocks         
globally, the U.S. dollar        against some safe-haven
currencies and the yields of core sovereign debt, including
Canadian government bonds.                         
    Canada's 10-year yield,            , which on Monday hit a
near four-month low at 1.252%, was up 5.6 basis points at

 (Reporting by Fergal Smith; Editing by Steve Orlofsky and
Sandra Maler)
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