May 22, 2020 / 7:12 PM / 12 days ago

CANADA FX DEBT-C$ pares weekly gain as U.S.-China tensions strain risk appetite

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar weakens 0.3% against the greenback
    * Canadian retail sales fall 10% in March
    * Price of U.S. oil settles down nearly 2%
    * Canadian bond yields ease across a flatter curve

    By Fergal Smith
    TORONTO, May 22 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday as rising U.S.-China
tensions weighed on investor sentiment and domestic data showed
a record decline in retail sales, with the loonie giving back
some of the week's rally.
    Global equity markets          edged lower as Beijing moved
to impose a new security law on Hong Kong after last year's
pro-democracy unrest, further straining U.S.-China ties that
cast a pall over economic recovery prospects.             
    Canada runs a current account deficit and is a major
producer of commodities, including oil, so the loonie tends to
be sensitive to the global flow of trade and capital.
    "Risk sentiment – expressed via equity gains or losses –
remains the key driving force behind the CAD," strategists at
Scotiabank, including Shaun Osborne, said in a note.
    "While the CAD is trading closely with equity market
sentiment, the rebound in crude oil prices and improvement in
relative terms of trade warrant attention," the strategists
said.
    Oil has rallied in recent days as economic activity starts
to resume, but prices dropped after China said on Friday it
would not publish an annual growth target for the first time.
U.S. crude oil futures        settled down nearly 2% at $33.25 a
barrel.
    The Canadian dollar          was trading 0.3% lower at
1.3993 to the greenback, or 71.46 U.S. cents. The currency,
which was up 0.7% for the week, traded in a range of 1.3945 to
1.4049.
    Canadian retail sales plunged a record 10% in March as
officials shuttered many non-essential businesses to slow the
spread of the coronavirus pandemic, while the advance results
for April indicate a near 16% decline, Statistics Canada said.
            
    Canadian government bond yields eased across a flatter
curve, with the 10-year yield             down 3.8 basis points
at 0.510%.

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