Canadian dollar slides to one-week low as oil falls 5%

The commodity-linked Canadian dollar weakened to a one-week low against its U.S. counterpart on Thursday as oil prices fell and data showed the U.S. economy suffered its steepest contraction since the Great Depression in the second quarter.

Canada sends about 75 per cent of its exports to the United States, including oil. U.S. crude prices were down 5 per cent at $39.19 a barrel, as surging coronavirus infections around the world threatened to jeopardise a recovery in fuel demand just as major oil producers are set to raise output.

A stalemate on U.S. fiscal support added to investor worries, with shares globally falling just one day after the Federal Reserve’s pledge to use all its tools to support the U.S. economy.

U.S. gross domestic product collapsed at a 32.9 per cent annualized rate last quarter as business activity came to an abrupt halt due to efforts to slow the virus outbreak.

The Canadian dollar was trading 0.8 per cent lower at 1.3445 to the greenback, or 74.38 U.S. cents. The currency touched its weakest intraday level since July 22 at 1.3453.

Easing of COVID-19 restrictions not yet reflected in May payroll employment, with the number of Canadians receiving pay from their employer falling by 4.1 per cent, data from Statistics Canada showed.

Canada’s GDP report for May is due on Friday. It is expected to show some recovery in the economy after a sharp contraction in April.

Canadian government bond yields were lower across the curve in sympathy with U.S. Treasuries on Thursday. The 10-year was down 1.5 basis points at 0.464 per cent, having touched its lowest intraday level since May 15 at 0.453 per cent.

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