March 17, 2020 / 1:34 PM / in 22 days

CANADA FX DEBT-C$ tumbles to 4-year low as pressure rises on BoC to cut rates further

    * Canadian dollar falls 0.8% against the greenback
    * Loonie touches its weakest since January 2016 at 1.4164
    * Canadian manufacturing sales fall 0.2% in January
    * Canadian bond yields rise across the curve

    By Fergal Smith
    TORONTO, March 17 (Reuters) - The Canadian dollar weakened
to a four-year low against its U.S. counterpart on Tuesday as
growing panic about a coronavirus-induced economic slump boosted
the greenback and weak factory data added to pressure on the
Bank of Canada to cut further.
    Canadian manufacturing sales fell 0.2% in January, the fifth
consecutive monthly decline.
    "It does indicate that the Bank of Canada likely needed to
cut rates regardless of COVID-19," said Royce Mendes, a senior
economist at CIBC Capital Markets. "That suggests the bank
should be trimming rates to the effective lower bound as soon as
possible."
    Last Friday, the central bank cut its key policy rate by 50
basis points to 0.75% in an emergency move.
    Funding pressures in the market for U.S. dollars        are
growing sharply, with the greenback surging nearly 1.5% against
a basket of other major currencies.                  
    At 9:18 a.m. (1318 GMT), the Canadian dollar          was
trading 0.8% lower at 1.4124 to the greenback, or 70.80 U.S.
cents. The currency touched its weakest intraday level since
January 2016 at 1.4164.
    The price of oil, one of Canada's major exports, held near
its lowest level since 2016 as the coronavirus pandemic hurts
the demand outlook and Saudi Arabia and Russia battle for market
share. U.S. crude oil futures        were down 0.2% at $28.64 a
barrel.             
    Ontario, Canada's most populous province, banned gatherings
of more than 50 people and ordered the closure of bars and
restaurants in a bid to slow the spread of the coronavirus.
            
    On Monday, Canada closed its borders to all foreign
nationals except U.S. citizens and permanent residents, with
Prime Minister Justin Trudeau urging people to limit social
contact to stem the spread of the virus.                 
    Canadian government bond yields rose across the yield curve,
with the 10-year yield up 1.9 basis points at 0.801%. Last week,
the 10-year yield hit a record low at 0.233%.   
    Canada's inflation report for February is due on Wednesday.

 (Reporting by Fergal Smith; Editing by Steve Orlofsky)
  
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