March 5, 2020 / 9:33 PM / a month ago

CANADA FX DEBT-Loonie weakens as global fears grow about economic impact of coronavirus

 (Adds dealer quotes and details throughout, updates prices)
    * Canadian dollar weakens 0.2% against the greenback
    * Loonie trades in a range of 1.3383 to 1.3439
    * Price of U.S. oil decreases 1.9%
    * Canada's 10-year yield hits a record low at about 0.850%

    By Fergal Smith
    TORONTO, March 5 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Thursday as investors grew more
concerned about the economic impact of the coronavirus and the
Bank of Canada left the door open to further interest rate cuts
to cushion the blow.
    At 3:54 p.m. (2054 GMT), the Canadian dollar          was
trading 0.2% lower at 1.3415 to the greenback, or 74.54 U.S.
cents. The currency, which last Friday hit a nine-month low at
1.3465, traded in a range of 1.3383 to 1.3439.
    The Canadian economy's resilience could be "seriously
tested" by the coronavirus outbreak, depending on its severity
and duration, Bank of Canada Governor Stephen Poloz said. On
Wednesday, the central bank slashed its key interest rate by
half a percentage point and said it was prepared to cut further
if needed to help tackle the effects of the virus.             
    Money markets are expecting a further rate cut by June when
Poloz is due to step down. It would leave the governor setting
interest rates near historic lows to support the broader economy
at the risk of stoking higher prices in a housing market that is
heating up. That was also the situation he faced when his term
began seven years ago.              
    "Looks like CAD might continue to weaken as long as bond
yields continue to collapse," said Michael Goshko, corporate
risk manager at Western Union Business Solutions.
    U.S. Treasuries rallied as the market weighed the
implications of increasing coronavirus quarantines on the global
economy, while Canada's 10-year yield tumbled nearly 17 basis
points to hit a record low at about 0.850%.
    Canada runs a current account deficit and is a major
exporter of commodities, including oil, so a downdraft for the
global economy could hurt.
    Stocks          tumbled globally and the price of oil
settled 1.9% lower at $45.90 a barrel.
    Canada's jobs report for February is due on Friday.

 (Reporting by Fergal Smith; Editing by Peter Cooney)
  
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