July 16, 2020 / 7:51 PM / 25 days ago

CANADA FX DEBT-C$ slides as rising U.S. COVID-19 cases crimp risk appetite

 (Adds strategist quotes and details throughout, updates prices)
    * Canadian dollar falls 0.5% against the greenback
    * Loonie touches its strongest intraday level since July 9
    * Price of U.S. oil settles 1.1% lower
    * Canada's 10-year yield eases 3.4 basis points to 0.504%

    By Fergal Smith
    TORONTO, July 16 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Thursday as investors worried
that rising coronavirus cases in the United States could slow
economic recovery, with the loonie pulling back from an earlier
one-week high.
    The S&P 500 slipped from a five-week high after a jump in
coronavirus caseloads that has forced California and other
states to shut down again.             
    "It still remains a story of equities and risk sentiment"
for the Canadian dollar, said Christian Lawrence, a senior
market strategist at Rabobank.
    Canada runs a current account deficit and is a major
exporter of commodities, including oil, so the loonie tends to
be sensitive to the global flow of trade and capital.
    U.S. crude futures        settled 1.1% lower at $40.75 a
barrel after OPEC and other producers agreed to ease record
supply curbs from August.             
    The Canadian dollar        was trading 0.5% lower at 1.3575
to the greenback, or 73.66 U.S. cents. The currency touched its
strongest intraday level since last Thursday at 1.3498.
    Canada's historic budget deficit for this year, projected
just over a week ago to top C$340 billion, may be even higher if
the more pessimistic Bank of Canada growth forecast delivered on
Wednesday turns out to be right, analysts said.             
    The central bank said that Canada's economic activity would 
not return to pre-pandemic levels until 2022 and signaled its
benchmark interest rate could stay at 0.25% until 2023.
                
    Bank of Canada Governor Tiff Macklem "gave the clearest
guidance we've heard in years and the Bank's central scenario
was relatively cautious," Lawrence said.        
    Canada added more than 1 million jobs in June after shedding
nearly 3 million in May, a report from payroll services provider
ADP showed.                 
    Canadian government bond yields were lower across a flatter
curve, with the 10-year             down 3.4 basis points at
0.504%.

 (Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter
Cooney)
  
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