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The Canadian dollar weakened to a near one-week low against its U.S. counterpart on Tuesday as economic damage from the coronavirus epidemic weighed on investor sentiment and domestic data showed a surprise decline in manufacturing sales.

Equity markets slid after Apple Inc said it was unlikely to meet its sales guidance because of the coronavirus outbreak in China, a warning highlighting the epidemic’s threat to global growth and corporate profits.

Canada is a major exporter of commodities, including oil, so its economy could be hurt by a slowdown in global growth.

“Supply chain disruptions have an impact on global growth. ... Is this an environment where CAD can perform? Probably not,” said Mazen Issa, a senior FX strategist at TD Securities.

“It is largely going to be defensive on the CAD side versus the (U.S.) dollar, just because the dollar is the currency of choice at the moment,” Issa said.

The greenback rose to its highest in nearly three years against the euro, which was pressured by a German survey showing slumping investor confidence in Europe’s largest economy.

Canadian factory sales decreased by 0.7 per cent in December from November, the fourth consecutive monthly decline, on lower sales in motor vehicle assembly, as well as aerospace products and parts, Statistics Canada said. Economists had expected a 0.5 per cent increase.

U.S. crude oil futures settled unchanged at $52.05 a barrel as concerns over the impact on crude demand from the coronavirus outbreak was offset from a reduction in supply from Libya.

At 4:51 p.m., the Canadian dollar was trading 0.1 per cent lower at 1.3256 to the greenback, or 75.44 U.S. cents. The currency touched its weakest intraday level since last Wednesday at 1.3278.

Canada announced a change to a three-year-old financial stress test designed to reduce risky mortgage lending, potentially reigniting housing markets the measure was meant to cool, and posing a challenge for the Bank of Canada.

Clues about the Bank of Canada interest rate outlook could come from Canada’s inflation report for January, which is due on Wednesday. Money markets see about a 50 per cent chance that the central bank would ease as soon as April.

Canadian government bond yields were lower across the yield curve in sympathy with U.S. Treasuries on Tuesday. The 10-year yield fell 3.5 basis points to 1.329 per cent.

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