Canadian dollar pares weekly gain as U.S. political uncertainty climbs

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 against the greenback on Friday as U.S. political uncertainty pressured Wall Street and oil prices, but the loonie still gained ground on the week, overcoming a rise in domestic coronavirus cases.

The loonie CAD= was trading 0.2% lower at 1.3309 to the greenback, or 75.14 U.S. cents, having traded in a range of 1.3277 to 1.3330. For the week, the loonie was up 0.6%.

The rising number of COVID 19 cases in Canada hampered the loonie earlier this week but the currency has benefited from a pull back in the U.S. dollar, said Hendrix Vachon, a senior economist at Desjardins.

Direction for the currency is mostly being driven by “the USD trend” and risk appetite, Vachon said.

The S&P 500 was lower as news that U.S. President Donald Trump tested positive for COVID-19 put investors in a risk-off mood and added to mounting uncertainties surrounding the looming election.

Investors also weighed data showing U.S. job growth slowed more than expected in September. Canada sends about 75% of its exports to the United States, including oil. U.S. crude oil futures CLc1 settled 4.3% lower at $37.05 a barrel.

Canada’s Quebec province reported more than 1,000 new COVID-19 cases on Friday, a resurgence of infections despite recent measures aimed at limiting social gatherings blamed for the pick up among residents under the age of 30.

Still, the Canadian dollar is set to gain ground against its U.S. counterpart in a year as an expected recovery in the global economy from the coronavirus crisis improves the outlook for commodity prices, a Reuters poll showed.

Canadian government bond yields were mixed across a steeper curve on Friday, with the 10-year CA10YT=RR up 1 basis point at 0.542%.

Reporting by Fergal Smith; Editing by Nick Zieminski and Sandra Maler