Home Forex Canadian dollar near eight-week low as virus fears intensify

Canadian dollar near eight-week low as virus fears intensify

by Jonathan Adams
Canadian dollar

The Canadian dollar posted its biggest monthly decline since 2018 as concerns around the China virus pressured commodity-linked currencies

The Canadian dollar fell to a near eight-week low against the greenback on Friday as rising concern about the economic impact of the coronavirus pressured commodity-linked currencies, with the loonie seeing its biggest monthly loss since December 2018.

At 3:45 p.m. (2045 GMT), the Canadian dollar was trading 0.2% lower at 1.3233 to the greenback, or 75.57 U.S. cents. The currency touched its weakest intraday level since Dec. 9 at 1.3253.

It’s a growth story, said Alvise Marino, a foreign exchange strategist at Credit Suisse in New York. “People look and see oil is down, they see copper is down, they see iron ore is down and therefore they unwind long risk positions.”

The currencies of commodity-producing countries such as Canada, Australia and New Zealand tend to be more sensitive to risk appetite and prospects for the global economy than some other G10 currencies. Both the Australian dollar and the New Zealand dollar fell nearly 0.4%.

Global equities fell, while the price of oil, one of Canada’s major exports, settled 1.1% lower at $51.66 a barrel. Crude has fallen more-than 20% from this month’s peak.

For January, the loonie was down 1.8%. It follows a 5% gain in 2019, when the loonie was the top-performing G10 currency.

Canadian gross domestic product edged up by 0.1% in November as increases in utilities as a result of a cold weather snap helped to offset the effects of a rail strike, Statistics Canada said on Friday. Analysts had forecast no change.

The return to growth in Canada’s economy during November suggests that activity at the end of the year was not quite as poor as feared, said Ryan Brecht, a senior economist at Action Economics.

Last week, the Bank of Canada left the door open to an interest rate cut should a recent slowdown in domestic growth persist. Money markets see about a 60% chance that the central bank will ease by April.

Speculators have cut their bullish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. As of Jan. 28, net long positions had fallen to 34,590 contracts from 38,294 in the prior week.

Canadian government bond yields were lower across the yield curve, with the 10-year yield             falling 6.5 basis points to 1.265%. It touched its lowest intraday since Oct. 8 at 1.257%.

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