January 27, 2020 / 2:55 PM / a month ago

CANADA FX DEBT-Canadian dollar drops to 7-week low as virus fears grow

    * Declining oil prices weigh on Canadian dollar 
    * Bond yields fall across the maturity curve
    * Canadian 10-year yield falls to lowest since October
    * Canadian dollar slides to lowest since mid-December 

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Jan 27 (Reuters) - The Canadian dollar fell to a
seven-week low against the U.S. dollar on Monday, weighed down
by lower oil prices, as investors dumped commodity-linked
currencies amid fears about the spread of the latest
coronavirus, which broke out in China a few weeks ago.
    The Australian and New Zealand dollars, also tied to
commodity prices like the Canadian currency, were under pressure
as well. 
    Investors are worried about the impact of the virus on
travel, tourism and broader global economy. 
    U.S. crude oil prices fell to their lowest in more than
three months on concerns that the virus could hamper economic
growth and reduce demand for fuel. U.S. crude oil futures       
were down 3% at $52.52 per barrel. 
    Oil prices have lost 13% of their value since news of the
virus grabbed headlines last week.
    The death toll from the virus rose to 81 on Monday, with
more than 2,800 infected. 
    A small number of cases linked to people who traveled from
Wuhan have been confirmed in more than 10 countries, including
Thailand, France, Japan and the United States, but no deaths
have been reported outside China. Cambodia confirmed its first
case on Monday.             
    "This is all about the virus headlines and risk aversion and
the flight to the U.S. dollar," said Shaun Osborne, chief FX
strategist at Scotia Bank in Toronto.
    "There has been a significant  sell-off in commodity prices,
and that's why we're seeing a sell-off as well in the Aussie
(Australian dollar), Kiwi (New Zealand dollar), and Canadian
dollar."
    In midmorning trading, the Canadian dollar          was down
against the greenback, which was up 0.3% at C$1.3193. It fell to
C$1.32 per U.S. dollar, the lowest since mid-December.
    The Canadian dollar has been on a downtrend since the Bank
of Canada took an unexpected dovish turn last week when it left
its benchmark interest rate steady at 1.75%, as expected, but
said a future cut was possible should a recent slowdown in
domestic growth persist.             
    In the debt market, Canadian government debt yields were
lower across the maturity curve, with the two-year yield
           down at 1.438% versus 1.486% late on Friday.
    Benchmark 10-year yields also fell to 1.303%            ,
from Friday's 1.362%. Earlier in the session, 10-year yields
fell to a 3-1/2-month low of 1.3%.

 (Reporting by Gertrude Chavez-Dreyfuss; editing by Jonathan
Oatis)
  
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