February 28, 2020 / 9:10 PM / a month ago

CANADA FX DEBT-Commodity-linked loonie slides to 9-month low on coronavirus panic

 (Adds strategist quotes and details throughout; updates prices)
    * Canadian dollar falls 0.1% against the greenback
    * Loonie hits its weakest since June 2019 at 1.3465
    * Price of U.S. oil tumbles nearly 5%
    * Canada's 2-year yield falls to its lowest since July 2017

    By Fergal Smith
    TORONTO, Feb 28 (Reuters) - The Canadian dollar weakened to
a nine-month low against the greenback on Friday as concerns
rose about the impact of the coronavirus outbreak on Canada's
commodity-linked economy and data showed barely any growth in
the fourth quarter.
    At 3:39 p.m. (2039 GMT), the Canadian dollar          was
trading 0.1% lower at 1.3408 to the greenback, or 74.58 U.S.
cents. The currency touched its weakest intraday level since
June, last year at 1.3465.
    For the week, the loonie fell 1.4%, its biggest weekly
decline in more than a year, while it was down 1.3% for the
month. 
    "The bears have come out of hibernation and are rampaging
through the currency markets at the moment and certainly taking
a negative view on the outlook for the Canadian economy," said
Karl Schamotta, chief market strategist at Cambridge Global
Payments.
    Canada runs a current account deficit and is a major
exporter of commodities, including oil, so its economy could be
hurt by a slowdown in the global flow of trade or capital.
    The coronavirus panic sent world stock markets and the price
of oil tumbling. U.S. crude oil futures        settled nearly 5%
lower at $44.76 a barrel.                         
    Canada's economic growth slowed to an annualized rate of
0.3% in the fourth quarter, the worst performance in almost four
years, due in part to strikes, bad weather and shutdowns,
Statistics Canada said. The number matched both the forecast of
analysts in a Reuters poll as well as the Bank of Canada's
prediction.             
    Chances of a Bank of Canada interest rate cut next Wednesday
have climbed to about 65% from less than 20% one week ago, data
from the overnight index swaps market showed.           
    Speculators have raised their bullish bets on the Canadian
dollar for the first time in five weeks, data from the U.S.
Commodity Futures Trading Commission and Reuters calculations
showed. As of Feb. 25, net long positions had increased to
14,624 contracts from 7,817 in the prior week.   
    Canadian government bond yields fell across a steeper yield
curve in sympathy with U.S. Treasuries. The two-year yield
declined 9.6 basis points to 1.152%, its lowest since July 2017.
    The gap between Canada's two-year yield and its U.S.
equivalent widened by 13.7 basis points to a spread of 28.2
basis points in favor of the Canadian bond, its biggest gap
since January 2015.

 (Reporting by Fergal Smith; Editing by David Gregorio)
  
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