February 7, 2020 / 3:05 PM / 4 months ago

CANADA FX DEBT-Loonie hits 2-1/2 month low as coronavirus worries offset jobs gain

    * Canadian dollar hits weakest level since Nov. 21 at 1.3322
    * Canada adds 34,500 jobs in January
    * Price of U.S. oil falls 1.2%
    * Canadian bond yields fall across a flatter yield curve

    By Fergal Smith
    TORONTO, Feb 7 (Reuters) - The Canadian dollar fell to a
two-and-a-half month low against the greenback on Friday as the
coronavirus outbreak weighed on investor sentiment, offsetting
reduced bets for a Bank of Canada interest rate cut after
domestic data showed a solid jobs gain.
    Canada added 34,500 jobs in January, more than twice the
number markets were expecting, and the unemployment rate dipped
to a near record low 5.5%, Statistics Canada data indicated.
            
    It was "another encouraging report for Canada's economy
around the turn of the year that in turn adds to the backing for
the BoC to maintain steady rates in the near term," said Ryan
Brecht, a senior economist at Action Economics.
    Chances that the Bank of Canada would cut interest rates by
April dipped to less than 40% from about 45% before the jobs
report, data from the overnight index swaps market showed.
          
    At 9:19 a.m. (1419 GMT), the Canadian dollar          was
trading 0.2% lower at 1.3309 to the greenback, or 75.14 U.S.
cents. The currency touched its weakest intraday level since at
Nov. 21 at 1.3322.
    For the week, the loonie was down 0.5% as investors worried
that the recent slump in crude oil prices due to the coronavirus
outbreak in China would weigh on Canada's commodity-linked
economy.
    The price of oil, one of Canada's major exports, fell as
Russia said it would need more time before committing to output
cuts along with OPEC and other producers amid falling demand for
crude as China battles the coronavirus epidemic.             
    U.S. crude oil futures        were down 1.2% at $50.36 a
barrel, while stocks          globally fell as investors wavered
over the impact of the coronavirus and assessed the U.S.
employment report for January that showed acceleration in jobs
growth but included a downward revision to certain previous
numbers.                  
    Canadian government bond yields declined across a flatter
yield curve. The 10-year yield was down 2.9 basis points at
1.336%.

 (Reporting by Fergal Smith, Editing by Franklin Paul)
  
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