The Canadian dollar fell to a two-and-a-half month low against the greenback on Friday as the coronavirus outbreak weighed on investor sentiment, offsetting reduced bets for a Bank of Canada interest rate cut after domestic data showed a solid jobs gain.
At 3:55 p.m., the Canadian dollar was trading 0.1 per cent lower at 1.3301 to the greenback, or 75.18 U.S. cents. The currency touched its weakest intraday level since Nov. 21 at 1.3322.
For the week, the loonie was down 0.5 per cent as investors worried that the slump in crude oil prices amid the coronavirus outbreak in China would weigh on Canada’s commodity-linked economy.
Speculators have slashed their bullish bets on the Canadian dollar to a five-week low, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of Feb. 4, net long positions had fallen to 18,563 contracts from 34,590 in the prior week.
The price of oil, one of Canada’s major exports, fell as Russia said it would need more time before committing to output cuts along with OPEC and other producers amid falling demand for crude as China deals with the coronavirus. U.S. crude oil futures were down 1 per cent at $50.42 a barrel.
Wall Street pulled back from record levels after a four-day rally as investors braced for the next developments involving the virus and digested a report showing U.S. job growth accelerated last month.
Canada added 34,500 jobs in January, more than twice the number markets were expecting, and the unemployment rate dipped to a near record low 5.5 per cent, Statistics Canada data indicated.
It was “another encouraging report for Canada’s economy around the turn of the year that in turn adds to the backing for the BoC to maintain steady rates in the near term,” said Ryan Brecht, a senior economist at Action Economics.
Chances that the Bank of Canada would cut interest rates by April dipped to less than 40 per cent from about 45 per cent before the jobs report, data from the overnight index swaps market showed.
Canadian government bond yields fell across a flatter yield curve. The 10-year yield was down 4.2 basis points at 1.327 per cent.
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