February 10, 2020 / 3:29 PM / 12 days ago

CANADA FX DEBT-Loonie hits 4-month low as coronavirus worries offset housing gains

    * Canadian dollar hits weakest level since Oct. 10 at 1.3330
    * Price of U.S. oil decreases 0.8%
    * Canadian housing starts rise 8.8% in January
    * Canadian bond yields fall across the yield curve

    By Fergal Smith
    TORONTO, Feb 10 (Reuters) - The commodity-linked Canadian
dollar weakened to a four-month low against its U.S. counterpart
on Monday as worries that the coronavirus outbreak would slow
global economic growth overshadowed stronger-than-expected
domestic housing data.
    Global shares          sank as the death toll from a
coronavirus outbreak exceeded that of the SARS epidemic of two
decades ago.             
    Canada is a major producer of commodities, including oil, so
its economy could be hurt by a slowdown in global growth.
    U.S. crude oil futures        were down 0.8% at $49.90 a
barrel on weaker Chinese oil demand in the wake of the virus
outbreak and as traders waited to see if Russia would join other
producers in seeking further output cuts.             
    At 9:46 a.m. (1446 GMT), the Canadian dollar          was
trading 0.1% lower at 1.3321 to the greenback, or 75.07 U.S.
cents. The currency, which fell 0.5% last week, touched its
weakest intraday level since Oct. 10 at 1.3330.
    Speculators have slashed their bullish bets on the Canadian
dollar to a five-week low, data from the U.S. Commodity Futures
Trading Commission and Reuters calculations showed on Friday. As
of Feb. 4, net long positions had fallen to 18,563 contracts
from 34,590 in the prior week.             
    Canadian housing starts rose by 8.8% in January compared
with the previous month to 213,224 units as groundbreaking
increased on multiple unit urban homes, data from  he Canadian
Mortgage and Housing Corporation showed on Monday. Economists
had expected starts to rise to 205,000.             
    "January's positive print is consistent with our forecast
calling for residential investment to support overall growth in
the first quarter," Rishi Sondhi, an economist at TD Bank Group,
said in a research note.
    Separate data, from Statistics Canada, showed that the value
of Canadian building permits rose by 7.4% in December from
November.             
    It follows data on Friday showing that Canada added 34,500
jobs in January, more than twice the number markets were
expecting, which prompted investors to reduce bets that the Bank
of Canada would cut interest rates as soon as next month.
            
    Bank of Canada Governor Stephen Poloz, who is due to step
down in June, will speak on Thursday in Melbourne, Australia.   
        
    Canadian government bond yields were lower across the yield
curve in sympathy with U.S. Treasuries. The 10-year yield
            fell 2.6 basis points to 1.304%.

 (Reporting by Fergal Smith; Editing by Andrea Ricci)
  
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