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Loonie extends weekly decline as trade uncertainty weighs on sentiment

TORONTO (Reuters) - The Canadian dollar added to this week’s decline against its U.S. counterpart on Friday as worries rose that trade tensions between the United States and China could ramp up and domestic data showed a record plunge in home sales.

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

U.S. stocks fluctuated as the Trump administration moved to block shipments of semiconductors to China’s Huawei Technologies from global chipmakers. A renewed Sino-U.S. trade war could worsen the economic downturn caused by the coronavirus outbreak.

Declines on Wall Street in recent days have been a headwind for the Canadian dollar, said Erik Nelson, a currency strategist at Wells Fargo in New York.

“We’re in a market now where liquidity is so thin” that trading flows can move a currency more than would be expected, Nelson said.

Canadian home sales tumbled by 56.8% in April from the previous month as lockdowns to help contain the coronavirus pandemic pushed buyers and sellers to the sidelines, the Canadian Real Estate Association (CREA) said.

The Canadian dollar CAD=D4 was trading 0.4% lower at 1.4102 to the greenback, or 70.91 U.S. cents. The currency, which was down 1.4% for the week, traded in a range of 1.4019 to 1.4117.

Ottawa has been rolling out fiscal measures to help cushion the economic impact of the coronavirus crisis on Canadians. On Friday, Prime Minister Justin Trudeau said that an emergency wage subsidy program would be extended by three months to the end of August to help firms retain employees.

Canadian investors divested a record-breaking C$42.2 billion in foreign securities in March amid heightened market volatility caused by the coronavirus pandemic, Statistics Canada data showed.

U.S. crude oil futures settled 6.89% higher at $29.43 a barrel on signs that demand was picking up, with China reporting increased refinery runs and rounding out a week of bullish news on the supply front. Oil is one of Canada’s major exports.

Canadian government bond yields rose across the curve, with the 10-year CA10YT=RR up 1.5 basis points at 0.542%.

Canadian financial markets will be closed on Monday for the Victoria Day holiday.

Reporting by Fergal Smith; Editing by Andrea Ricci and Grant McCool

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