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The Canadian dollar fell to a six-week low against its broadly stronger U.S. counterpart on Wednesday as investors ditched commodity-linked currencies due to worries about rising coronavirus cases, while Ottawa promised more economic support.

The loonie was trading 0.6 per cent lower at 1.3376 to the greenback, or 74.76 U.S. cents. The loonie touched its weakest intraday level since Aug. 10 at 1.3381, while the safe-haven U.S. dollar expanded on its eight-week high.

“A second wave of coronavirus infections in a number of major economies has unleashed a tsunami of risk aversion,” said Karl Schamotta, chief market strategist at Cambridge Global Payments. “Traders are selling economically sensitive currencies like the Canadian dollar.”

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Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to the global flow of trade.

Australia and New Zealand are also major commodity producers. Their currencies fell by more than 1 per cent, while shares on Wall Street tumbled as data showing a slowdown in domestic business activity and a stalemate in Congress over more coronavirus relief raised fears of a choppy economic recovery from a pandemic-driven recession.

Canada’s Liberal government promised major new investments and policy initiatives to help the country recover from the coronavirus pandemic, saying “this is not the time for austerity”.

Economic growth in Canada has rebounded sharply in recent months, but the country faces a resurgence in coronavirus cases.

The price of oil, one of Canada’s major exports, was supported by U.S. government data that showed crude and fuel inventories dropped last week, although concerns about the ongoing pandemic capped gains.

U.S. crude oil futures settled 0.3 per cent higher at $39.93 a barrel, while Canadian government bond yields were little changed across the curve, with the 10-year trading at 0.555 per cent.

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