Canadian dollar hits 10-day low as virus clips global outlook

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/File Photo

TORONTO (Reuters) - The Canadian dollar weakened by the most in nearly five weeks against its U.S. counterpart on Monday, as investors grew more worried about the outlook for the global economy and eyed a Bank of Canada interest rate decision this week.

U.S. stocks tumbled as soaring coronavirus cases and uncertainty about a fiscal relief bill in Washington dimmed the outlook for the U.S. economic recovery.

“The loonie has suffered from the deterioration in the global economic outlook today,” said Simon Harvey, FX market analyst for Monex Europe and Monex Canada.

“With Canada’s second wave aligning with that in Europe and the loonie’s price action linked with oil market dynamics, the loonie hasn’t found any shelter in today’s risk-off selling,” Harvey said.

Oil CLc1, one of Canada's major exports, settled 3.2% lower at $38.56 a barrel, while the safe-haven U.S. dollar .DXY rose against a basket of major currencies.

The Canadian dollar CAD= was trading 0.6% lower at 1.3197 to the greenback, or 75.77 U.S. cents, its biggest drop since Sept. 23. The currency touched its weakest intraday level since Oct. 16 at 1.3225.

Speculators have raised their bearish bets on the Canadian dollar to their highest in seven weeks, data from the U.S. Commodity Futures Trading Commission showed on Friday.

The Bank of Canada is due to make an interest rate decision and update its economic outlook on Wednesday. The central bank has said it will leave rates at a record low of 0.25% until its 2% inflation target is achieved sustainably, which it does not expect for at least two years.

Canadian government bond yields were lower across much of a flatter curve in sympathy with U.S. Treasuries on Monday. The 10-year yield CA10YT=RR fell 1.6 basis points to 0.627%, extending its pullback from Friday's eight-week high of 0.680%.

Reporting by Fergal Smith; Editing by David Goodman and Alison Williams