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The Canadian dollar strengthened against its U.S. counterpart on Friday, rebounding from a four-year low the day before, as expectations climbed that policymakers would provide stimulus to help contain the economic impact of the coronavirus outbreak.

World stocks and the price of oil, one of Canada’s major exports, bounced off their lows as central banks stepped in to ease a liquidity squeeze and U.S. Democrats and Republicans signaled they could soon agree on support measures.

U.S. crude oil futures were up 7.1 per cent at $33.74 a barrel. Still, prices were set for their biggest weekly slide since the 2008 financial crisis as the virus outbreak threatened demand and crude producers promised more supply.

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On Thursday, the Bank of Canada said it would provide billions of dollars of more liquidity to ensure markets continue to operate smoothly amid increasing uncertainty sparked by the virus. Last week, the central bank cut interest rates by 50 basis points.

At 8:51 a.m., the Canadian dollar was trading 0.6 per cent higher at 1.3835 to the greenback, or 72.28 U.S. cents. The currency, which on Thursday hit its weakest intraday level since February 2016 at 1.3962, traded in a range of 1.3782 to 1.3949.

For the week, the loonie was on track to decline 2.9 per cent, its biggest weekly decline since January 2015.

Despite prospects for stimulus, economists see potential for Canada’s economy to slip into recession.

“We’re penciling in two negative quarters in Q2 and Q3 at this point,” said Nathan Janzen, a senior economist at Royal Bank of Canada “Negatives from the virus and the oil price shock are too much to keep growth positive.”

Canadian Prime Minister Justin Trudeau will be in isolation for two weeks after his wife, Sophie, tested positive for coronavirus on Thursday, and the outbreak prompted the province of Ontario to shutter schools to limit the spread.

The ratio of Canadian household debt-to-income narrowed to 173.7 per cent in the fourth quarter from an upwardly revised 174.1 per cent in the third quarter, Statistics Canada said on Friday.

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Canadian government bond yields rose across a steeper yield curve, with the 10-year climbing 13.4 basis points to 0.727 per cent. On Monday, the 10-year yield hit a record low at 0.233 per cent.

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