February 26, 2020 / 6:05 PM / a month ago

CANADA FX DEBT-Loonie hits 2-week low as coronavirus hits commodity producers' outlook

 (Adds strategist quotes and details on activity; updates
prices)
    * Canadian dollar weakens 0.2% against the greenback
    * Loonie hits its lowest since Feb. 10 at 1.3322
    * Price of U.S. oil decreases 1.1%
    * Canadian bond yields fall across a steeper yield curve

    By Fergal Smith
    TORONTO, Feb 26 (Reuters) - The Canadian dollar weakened to
a two-week low against its broadly stronger U.S. counterpart on
Wednesday as investors bet that the spreading coronavirus
outbreak would hurt the economies of commodity producing
countries.
    At 12:36 p.m. (1736 GMT), the Canadian dollar          was
trading 0.2% lower at 1.3313 to the greenback, or 75.11 U.S.
cents. The currency touched its weakest intraday level since
Feb. 10 at 1.3322.
    "I think geographically it (Canada) is maybe a little bit
better placed than some other countries like Australia and New
Zealand in the midst of this outbreak," said Erik Nelson,
associate, currency strategist, at Wells Fargo. "But it is still
a risk-off currency so it's taking a hit and of course oil is
down so that's not helping either."
    Australia and New Zealand, like Canada, are major producers
of commodities. The currencies of all three countries tend to be
sensitive to the outlook for the global economy.
    The Australian dollar        was down 0.7%, while the price
of oil, one of Canada's major exports, fell to its lowest level
since January 2019 as Asia, Europe and oil-producing countries
in the Middle East reported hundreds of new coronavirus cases.
U.S. crude oil prices        were down 1.1% at $49.36 a barrel.
                
    The U.S. dollar        rebounded from a two-week low hit in
the previous session in step with U.S. equity markets.
            
    On Tuesday, protesters in Canada blocked train lines,
Vancouver's port entrance and at least one highway in response
to the arrest of 10 indigenous activists when police dismantled
a rail barricade in southern Ontario a day earlier.             
    Disruptions to rail could add to headwinds for Canada's
economy. Last month, the Bank of Canada opened the door to an
interest rate cut should a recent slowdown in domestic growth
persist.             
    Canadian government bond yields edged lower across a steeper
yield curve on Wednesday. The 10-year             was down 1
basis point at 1.204%. On Monday, the 10-year yield hit a near
six-month low at 1.170%.
    Toronto's stock market is set to recoup recent losses and
continue climbing but the coronavirus outbreak and its impact on
global growth could hold back prospects for a steeper uplift in
valuations, a Reuters poll found.             

 (Reporting by Fergal Smith; Editing by Steve Orlofsky and Tom
Brown)
  
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