January 28, 2020 / 9:10 PM / in a month

CANADA FX DEBT-Loonie rallies as Wall Street turns calmer on China virus threat

 (Adds strategist quotes and details throughout, updates prices)
    * Canadian dollar rises 0.2% against the greenback
    * Loonie touches its lowest intraday level since Dec. 11 at
1.3206
    * Price of U.S. oil increases 0.6%
    * Canada's 10-year yield hits a near four-month low intraday

    By Fergal Smith
    TORONTO, Jan 28 (Reuters) - The Canadian dollar strengthened
against the greenback on Tuesday as investors became less
fearful of the economic fallout from China's spreading
coronavirus, with the loonie recovering from a near seven-week
low it hit earlier in the day.
    At 3:28 p.m. (2028 GMT), the Canadian dollar          was
trading 0.2% higher at 1.3167 to the greenback, or 75.95 U.S.
cents. The currency touched its weakest intraday level since
Dec. 11 at 1.3206.
    "We had a risk-back-on day because everyone was tired of
panicking over the coronavirus." said Ronald Simpson, managing
director, global currency analysis at Action Economics. "Oil
prices recovered, which took the loonie off its seven-week
lows."
    The price of oil, one of Canada's major exports, rose after
falling for five days, gaining support from a rebound in Wall
Street stocks and talk that OPEC and its allies might tighten
the market amid fears the coronavirus could weigh on oil demand.
U.S. crude oil futures        settled 0.6% higher at $53.48 a
barrel.             
    The Canadian dollar has weakened 1.3% since the start of the
year after rallying 5% in 2019, when it was the top-performing
G10 currency.
    Canada's gross domestic product data for November is due on
Friday, which could help guide expectations for a Bank of Canada
interest rate cut.
    Last week, the central bank left its benchmark interest rate
steady at 1.75%, as expected, but said a future cut was possible
should a recent slowdown in domestic growth persist.
            
    Canadian government bond yields moved higher across the
yield curve in sympathy with U.S. Treasuries on Tuesday as risk
appetite improved. The 10-year yield rose by 5.4 basis points to
1.357%, rebounding after it hit its lowest intraday level since
Oct. 8 at 1.283%.
    The gap between Canada's 10-year yield and its U.S.
equivalent narrowed by 1.8 basis points to a spread of 28.3
basis points in favor of the U.S. bond.

 (Reporting by Fergal Smith; editing by Jonathan Oatis)
  
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