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The Canadian dollar weakened to a five-month low against its U.S. counterpart on Monday as a worldwide surge in coronavirus cases weighed on investor sentiment, with the currency shifting into negative territory for the year.

The Canadian dollar was trading 1.2% lower at 1.2758 to the greenback, or 78.38 U.S. cents, its biggest decline since June 2020. It touched its weakest intraday level since Feb. 5 at 1.2807.

Positive fundamentals for the Canadian dollar “are being overshadowed by a deepening of risk aversion and weaker commodity prices,” strategists at Scotiabank, including Shaun Osborne, said in a note.

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The safe-haven U.S. dollar rallied and equities globally tumbled as the continued spread of the highly contagious Delta variant raised doubts about the strength of economic recovery.

Canada is a major producer of commodities, including oil, so the loonie is sensitive to global economic prospects.

U.S. crude oil futures settled 7.5% lower at $66.42 a barrel after OPEC+ agreed to boost output, stoking fears of a surplus as rising COVID-19 infections threaten demand.

The loonie has slumped 5.9% since notching a six-year high near 1.20 in June, while it is down 0.2% since the start of 2021.

“The 1.20 level does now seem out of reach ... as markets start to consider the beginning of the Fed’s tapering and eventual rate hikes,” the Scotiabank strategists said.

The U.S. Federal Reserve is due to make an interest rate decision next week.

Speculators have cut their bullish bets on the Canadian dollar to the lowest in 10 weeks, data from the U.S. Commodity Futures Trading Commission (CFTC) showed on Friday.

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Canadian government bond yields fell across a flatter curve, tracking the move in U.S. Treasuries. The 10-year touched its lowest since Feb. 18 at 1.132% before recovering slightly to 1.141%, down 10 basis points on the day.

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