March 11, 2020 / 8:17 PM / 4 months ago

CANADA FX DEBT-Loonie weakens as investors dump Canadian stocks

 (Adds dealer quotes and details throughout; updates prices)
    * Canadian dollar falls 0.3% against the greenback
    * Price of U.S. oil declines 4%
    * Canada announces C$1 billion fund to fight coronavirus
outbreak
    * Canadian bond yields fall across the curve

    By Fergal Smith
    TORONTO, March 11 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Wednesday as global equity
markets, including the commodity-linked Toronto Stock Exchange,
tumbled after the World Health Organization deemed the
coronavirus outbreak a pandemic.
    At 3:33 p.m. (1933 GMT), the Canadian dollar          was
trading 0.3% lower at 1.3764 to the greenback, or 72.65 U.S.
cents. The currency, which on Tuesday hit a four-year low at
1.3796, traded in a range of 1.3682 to 1.3779.
    "Investors are just retreating from the stock market," said
Thomas Anderson, managing director at moneycorp North America.
"They are afraid of growth because of the coronavirus, so they
are moving money out of Canadian equities."
    Canada runs a current account deficit and exports many
commodities, including oil, so a slowdown in the global flow of
trade or capital could hurt.
    Canada's TSX Composite           fell to a 14-month low,
with heavily-weighted oil and gas companies hit particularly
hard as major oil producers intensified their oil price war.
    The TSX's energy sector fell as much as 9.1% intraday, while
U.S. crude oil futures        settled 4% lower at $32.98 a
barrel. On Monday, oil plunged as much as 33.8% after Saudi
Arabia and Russia both said they would raise production.
    "This is really disruptive to the people in the oil business
... and I think that is going to continue and the Canadian
dollar takes it on the chin because of that," Anderson said.    
    Canada is setting up a C$1 billion fund to help provinces
combat a worsening coronavirus outbreak and is prepared to spend
more money if necessary, Canadian Prime Minister Justin Trudeau
said. The government also said it would deliver on March 30 its
budget for the fiscal year that starts in April.
                        
    Last week, the Bank of Canada cut interest rates by 50 basis
points to help cushion the economic impact of the virus. Money
markets see it as likely that the central bank will ease by a
further 50 basis points in April.                       
    Canadian government bond yields declined across the yield
curve, with the 10-year yield down 5.2 basis points at 0.613%.
On Monday, the 10-year yield hit a record intraday low at
0.233%.

 (Reporting by Fergal Smith; Editing by Steve Orlofsky and Diane
Craft)
  
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