February 18, 2020 / 10:14 PM / 5 months ago

CANADA FX DEBT-C$ hits 6-day low on coronavirus damage, factory data miss

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar weakens 0.1% against the greenback
    * Canadian factory sales decrease by 0.7% in December
    * Loonie touches a six-day low at 1.3278
    * Canadian bond yields fall across the yield curve

    By Fergal Smith
    TORONTO, Feb 18 (Reuters) - The Canadian dollar weakened to
a near one-week low against its U.S. counterpart on Tuesday as
economic damage from the coronavirus epidemic weighed on
investor sentiment and domestic data showed a surprise decline
in manufacturing sales.
    Equity markets slid after Apple Inc          said it was
unlikely to meet its sales guidance because of the coronavirus
outbreak in China, a warning highlighting the epidemic's threat
to global growth and corporate profits.             
    Canada is a major exporter of commodities, including oil, so
its economy could be hurt by a slowdown in global growth.
    "Supply chain disruptions have an impact on global growth.
... Is this an environment where CAD can perform? Probably not,"
said Mazen Issa, a senior FX strategist at TD Securities.
    "It is largely going to be defensive on the CAD side versus
the (U.S.) dollar, just because the dollar is the currency of
choice at the moment," Issa said.
    The greenback rose to its highest in nearly three years
against the euro, which was pressured by a German survey showing
slumping investor confidence in Europe's largest economy.
                
    Canadian factory sales decreased by 0.7% in December from
November, the fourth consecutive monthly decline, on lower sales
in motor vehicle assembly, as well as aerospace products and
parts, Statistics Canada said. Economists had expected a 0.5%
increase.                 
    U.S. crude oil futures        settled unchanged at $52.05 a
barrel as concerns over the impact on crude demand from the
coronavirus outbreak was offset from a reduction in supply from
Libya.             
    At 4:51 p.m. (2151 GMT), the Canadian dollar          was
trading 0.1% lower at 1.3256 to the greenback, or 75.44 U.S.
cents. The currency touched its weakest intraday level since
last Wednesday at 1.3278.
    Canada announced a change to a three-year-old financial
stress test designed to reduce risky mortgage lending,
potentially reigniting housing markets the measure was meant to
cool, and posing a challenge for the Bank of Canada.
            
    Clues about the Bank of Canada interest rate outlook could
come from Canada's inflation report for January, which is due on
Wednesday. Money markets see about a 50% chance that the central
bank would ease as soon as April.               
    Canadian government bond yields were lower across the yield
curve in sympathy with U.S. Treasuries on Tuesday. The 10-year
yield             fell 3.5 basis points to 1.329%.

 (Reporting by Fergal Smith; editing by Steve Orlofsky and
Jonathan Oatis)
  
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