October 2, 2019 / 9:04 PM / a month ago

CANADA FX DEBT-C$ falls the most in 7 weeks as investors fret about growth

 (Adds dealer quotes and details throughout; updates prices)
    * Canadian dollar falls 0.7% against the greenback
    * Loonie hits weakest intraday level since Sept. 4 at 1.3325
    * Price of U.S. oil decreases 1.8%
    * Canada's 2-year yield climbs above its U.S. equivalent

    By Fergal Smith
    TORONTO, Oct 2 (Reuters) - The Canadian dollar weakened to a
four-week low against its U.S. counterpart on Wednesday as oil
prices fell and investors worried that a slowdown in U.S.
manufacturing activity could hurt Canada's trade-dependent
economy.
    Wall Street's main indexes suffered their sharpest one-day
declines in nearly six weeks after employment and manufacturing
data suggested that fallout from the U.S.-China trade war is
further hurting U.S. economic growth.             
    "Equity markets are down quite sharply overall as is oil
prices, so that is having an effect," said Rahim Madhavji,
president at KnightsbridgeFX.com. "If the U.S. economy sneezes
Canada catches a cold." 
    Canada sends about 75% of its exports, including oil, to the
United States.
    Oil prices fell after official data showed a rise in U.S.
crude inventories, adding to worries about an oversupplied
market as weak economic readings in the United States depressed
global financial markets. U.S. crude oil futures        settled
1.8% lower at $52.64 a barrel.             
    At 4:32 p.m. (2032 GMT), the Canadian dollar          was
trading 0.7% lower at 1.3320 to the greenback, or 75.08 U.S.
cents, its biggest decline since Aug. 14.
    The currency touched its weakest intraday level since Sept.
4 at 1.3325.
    The Bank of Canada has worried that the U.S.-China trade
conflict is weighing more heavily on the global economy, but has
showed no appetite for cutting rates amid steady domestic
activity.             
    Canada's trade report for August is due on Friday, which
could help guide expectations for the central bank's interest
rate outlook.
    Canadian government bond prices were higher across the yield
curve in sympathy with U.S. Treasuries. The two-year           
rose 7.5 Canadian cents to yield 1.491% and the 10-year
            was up 41 Canadian cents to yield 1.309%.    
    The 2-year yield climbed above its U.S. equivalent for the
first time since October 2017, as expectations rose that the
Federal Reserve would cut interest rates later this month.
            

 (Reporting by Fergal Smith; Editing by Bernadette Baum and
Alistair Bell)
  
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