The Canadian dollar weakened to a near three-week low against its U.S. counterpart on Monday before clawing back much of its decline, as the spread of a new coronavirus strain in Britain clipped investor risk appetite.
The strain, which is said to be up to 70 per cent more transmissible than the original, forced many countries, including Canada, to shut off travel ties with the UK.
“This reopening trade that we have seen over the last three or four months, that has propelled equity markets and risk assets like the Canadian dollar higher, we are seeing a bit of an unwind,” said Scott Smith, managing partner at Viewpoint Investment Partners.
Canada runs a current account deficit and is a major exporter of commodities, including oil, so the loonie tends to be sensitive to the global flow of trade and capital.
U.S. crude oil futures settled 2.8 per cent lower at $47.74 a barrel, while the Canadian dollar was trading down 0.3 per cent at 1.2825 to the greenback, or 77.97 U.S. cents. It touched its weakest intraday level since Dec. 2 at 1.2955.
Ontario, Canada’s most-populous province, announced a partial shutdown of some businesses starting on Saturday as part of a campaign to control a second wave of COVID-19.
It was not all bad news for the economy. The U.S. Congress was scrambling to pass a $900 billion coronavirus aid package following seven months of partisan bickering over the measure’s contents.
Canadian wholesale sales in November most likely rose by 1.0 per cent after a similar 1.0 per cent increase in October, Statscan said in a flash estimate. Canada’s GDP data for October is due on Wednesday.
Canadian government bond yields were lower across a flatter curve. The 10-year fell 2 basis points to 0.734 per cent, having touched its lowest intraday level since Dec. 1 at 0.690 per cent.
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