The Canadian dollar weakened to a two-week low against its broadly stronger U.S. counterpart on Wednesday as investors bet that the spreading coronavirus outbreak would hurt the economies of commodity producing countries.
At 12:36 p.m., the Canadian dollar was trading 0.2 per cent lower at 1.3313 to the greenback, or 75.11 U.S. cents. The currency touched its weakest intraday level since Feb. 10 at 1.3322.
“I think geographically it (Canada) is maybe a little bit better placed than some other countries like Australia and New Zealand in the midst of this outbreak,” said Erik Nelson, associate, currency strategist, at Wells Fargo. “But it is still a risk-off currency so it’s taking a hit and of course oil is down so that’s not helping either.”
Australia and New Zealand, like Canada, are major producers of commodities. The currencies of all three countries tend to be sensitive to the outlook for the global economy.
The Australian dollar was down 0.7 per cent, while the price of oil, one of Canada’s major exports, fell to its lowest level since January 2019 as Asia, Europe and oil-producing countries in the Middle East reported hundreds of new coronavirus cases. U.S. crude oil prices were down 1.1 per cent at $49.36 a barrel.
The U.S. dollar rebounded from a two-week low hit in the previous session in step with U.S. equity markets.
On Tuesday, protesters in Canada blocked train lines, Vancouver’s port entrance and at least one highway in response to the arrest of 10 indigenous activists when police dismantled a rail barricade in southern Ontario a day earlier.
Disruptions to rail could add to headwinds for Canada’s economy. Last month, the Bank of Canada opened the door to an interest rate cut should a recent slowdown in domestic growth persist.
Canadian government bond yields edged lower across a steeper yield curve on Wednesday. The 10-year was down 1 basis point at 1.204 per cent. On Monday, the 10-year yield hit a near six-month low at 1.170 per cent.
Toronto’s stock market is set to recoup recent losses and continue climbing but the coronavirus outbreak and its impact on global growth could hold back prospects for a steeper uplift in valuations, a Reuters poll found.
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