The Canadian dollar weakened to a nine-month low against the greenback on Friday as concerns rose about the impact of the coronavirus outbreak on Canada’s commodity-linked economy and data showed barely any growth in the fourth quarter.
At 3:39 p.m., the Canadian dollar was trading 0.1 per cent lower at 1.3408 to the greenback, or 74.58 U.S. cents. The currency touched its weakest intraday level since June, last year at 1.3465.
For the week, the loonie fell 1.4 per cent, its biggest weekly decline in more than a year, while it was down 1.3 per cent for the month.
“The bears have come out of hibernation and are rampaging through the currency markets at the moment and certainly taking a negative view on the outlook for the Canadian economy,” said Karl Schamotta, chief market strategist at Cambridge Global Payments.
Canada runs a current account deficit and is a major exporter of commodities, including oil, so its economy could be hurt by a slowdown in the global flow of trade or capital.
The coronavirus panic sent world stock markets and the price of oil tumbling. U.S. crude oil futures settled nearly 5 per cent lower at $44.76 a barrel.
Canada’s economic growth slowed to an annualized rate of 0.3 per cent in the fourth quarter, the worst performance in almost four years, due in part to strikes, bad weather and shutdowns, Statistics Canada said. The number matched both the forecast of analysts in a Reuters poll as well as the Bank of Canada’s prediction.
Chances of a Bank of Canada interest rate cut next Wednesday have climbed to about 65 per cent from less than 20 per cent one week ago, data from the overnight index swaps market showed.
Speculators have raised their bullish bets on the Canadian dollar for the first time in five weeks, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of Feb. 25, net long positions had increased to 14,624 contracts from 7,817 in the prior week.
Canadian government bond yields fell across a steeper yield curve in sympathy with U.S. Treasuries. The two-year yield declined 9.6 basis points to 1.152 per cent, its lowest since July 2017.
The gap between Canada’s two-year yield and its U.S. equivalent widened by 13.7 basis points to a spread of 28.2 basis points in favor of the Canadian bond, its biggest gap since January 2015.
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