March 4, 2020 / 9:54 PM / 3 months ago

CANADA FX DEBT-Loonie weakens as BoC slashes rates, signals ready to do more

 (Adds analyst quotes and additional details; updates prices)
    * Canadian dollar falls 0.1% against the greenback
    * Bank of Canada cuts benchmark interest rate by 50 basis
points
    * Price of U.S. oil decreases 0.9%
    * Canada's bond yields mixed across a steeper curve

    By Fergal Smith
    TORONTO, March 4 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Wednesday as the Bank of Canada
delivered its biggest interest rate cut in more than 10 years
and signaled it was ready to ease further because of the
coronavirus outbreak.
     At 4:19 p.m. (2119 GMT), the Canadian dollar          was
trading 0.1% lower at 1.3393 to the greenback, or 74.67 U.S.
cents. The currency traded in a range of 1.3330 to 1.3432.
    "All eyes were on the Bank of Canada today," said Andrew
Sierocinski, a foreign exchange analyst at Klarity FX in San
Francisco.
    The loonie weakened because the Bank of Canada chose to
match the previous day's 50-basis-points interest rate cut by
the Federal Reserve and signaled it was ready to ease further,
Sierocinski said.
     The central bank said the virus outbreak was "a material
negative shock" to the Canadian and global outlooks as it
slashed its benchmark interest rate to 1.25% from 1.75%. It was
the first time since March 2009, during the global financial
crisis, that it had cut by more than 25 basis points.
    "The virus is expected to take a greater toll on Canada's
economy than the U.S.'s due to weaker commodity prices and less
underlying strength," Sal Guatieri, a senior economist at BMO
Capital Markets, said in a note.
    "Lower rates are no vaccine, but they can partially treat
the symptoms of the virus by supporting confidence and shoring
up financial conditions," Guatieri said.
    Canada is prepared to act quickly to help companies hurt
financially by the outbreak of the new coronavirus and would not
need to wait for the next budget, Finance Minister Bill Morneau
said on Tuesday.                 
    The price of oil, one of Canada's major exports, gave up
early gains as major oil producers struggled to bring Russia on
board for deeper supply cuts to try to offset a slump in demand
caused by the virus outbreak. U.S. crude oil futures       
settled 0.9% lower at $46.78 a barrel.                 
    Canadian government bond yields were mixed across a steeper
yield curve. The two-year            fell 5.4 basis points to
0.927%, while the 10-year             was up 2.8 basis points at
0.992%. Earlier in the session, the 10-year yield touched a
record low at 0.857%         
    Canadian labor productivity fell by 0.1% in the fourth
quarter, as both hours worked and business output were little
changed, Statistics Canada said.             
    

 (Reporting by Fergal Smith; Editing by David Gregorio and Peter
Cooney)
  
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