Canadian dollar hits one-month low as oil prices slide

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

TORONTO (Reuters) - The Canadian dollar weakened to a one-month low against its U.S. counterpart on Thursday as the coronavirus outbreak weighed on oil prices, with the loonie adding to its decline since the Bank of Canada opened the door to lower interest rates.

The price of oil, one of Canada's major exports, fell on concern that the spread of a respiratory virus from China could lower fuel demand if it stunts economic growth in an echo of the SARS epidemic nearly 20 years ago. U.S. crude oil futures CLc1 were down 2.8% at $55.16 a barrel.

On Wednesday, the Bank of Canada left its benchmark interest rate on hold at 1.75% as expected but said a future cut was possible should a recent slowdown in domestic growth persist.

Money markets now see a greater-than 50% chance of a rate cut by April, up from about 20% before the rate decision. BOCWATCH

At 9:41 a.m. EST (1441 GMT), the Canadian dollar CAD=D4 was trading 0.2% lower at 1.3159 to the greenback, or 75.99 U.S. cents. The currency hit its weakest intraday level since Dec. 23 at 1.3171.

The loonie has fallen 1.3% since the start of the year after climbing 5% in 2019, when it was the top-performing G10 currency.

Canada’s retail sales report for November is due on Friday, which could be closely watched by investors after the October data showed the biggest monthly decline in nearly one year.

Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The two-year CA2YT=RR rose 7.6 Canadian cents to yield 1.509% and the 10-year CA10YT=RR was up 44 Canadian cents to yield 1.402%.

The 10-year yield hit its lowest intraday level since Nov. 20 at 1.402%.

Reporting by Fergal Smith; editing by Jonathan Oatis