March 12, 2020 / 2:12 PM / in 18 days

CANADA FX DEBT-Canadian dollar hits 4-year low as fears rise for world economy

    * Canadian dollar falls 0.3% against the greenback
    * Loonie touches its lowest level since February 2016 at
1.3854
    * Price of U.S. oil decreases 7.8%
    * Canadian bond yields tumble across a flatter curve

    TORONTO, March 12 (Reuters) - The commodity-linked Canadian
dollar weakened to a four-year low against its U.S. counterpart
on Thursday as investors increasingly worried that measures
taken to contain the coronavirus outbreak will disrupt the world
economy.
    At 9:49 a.m. (1349 GMT), the Canadian dollar          was
trading 0.3% lower at 1.3814 to the greenback, or 72.39 U.S.
cents. The currency touched its weakest intraday level since
February 2016 at 1.3854.
    Stocks globally          plunged into a bear market and oil
slumped after U.S. President Donald Trump banned travel from
Europe to stem the spread of the virus.             
    Canada runs a current account deficit and is a major
exporter of commodities, including oil, so the loonie is
sensitive to a slowdown in the global flow of trade or capital.
    U.S. crude oil futures        were down 7.8% at $30.41 a
barrel. The slump in oil is being compounded by the threat of a
flood of cheap supply after Saudi Arabia and the United Arab
Emirates said they would raise output in a standoff with Russia.
            
    On Wednesday, the premier of Alberta said the energy-rich
Canadian province will curtail oil production if necessary to
help an industry which is set to start laying off workers in
response to a global price war.             
    With the outlook for the world economy dimming and crude oil
prices crashing, money markets see it as likely the Bank of
Canada will cut its benchmark interest rate, which sits at
1.25%, by as much as 75 basis points at its next policy decision
on April 15.
    Last week, the central bank eased by 50 basis points, its
biggest move in more than a decade, to cushion the impact on the
economy from the virus outbreak.             
    Canadian bond yields tumbled across a flatter yield curve,
with the 10-year down 20.6 basis points at 0.450%. On Monday,
the 10-year yield hit a record intraday low at 0.233%.        

 (Reporting by Fergal Smith
Editing by Nick Zieminski)
  
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