February 7, 2020 / 9:24 PM / 14 days ago

CANADA FX DEBT-Canadian dollar hits 2-1/2 month low as virus worries offset jobs gain

 (Adds details on activity; updates prices)
    * Canadian dollar hits weakest level since Nov. 21 at 1.3322
    * Canada adds 34,500 jobs in January
    * Price of U.S. oil falls 1%
    * Canadian bond yields fall across a flatter yield curve

    By Fergal Smith
    TORONTO, Feb 7 (Reuters) - The Canadian dollar fell to a
two-and-a-half month low against the greenback on Friday as the
coronavirus outbreak weighed on investor sentiment, offsetting
reduced bets for a Bank of Canada interest rate cut after
domestic data showed a solid jobs gain.
    At 3:55 p.m. (2055 GMT), the Canadian dollar          was
trading 0.1% lower at 1.3301 to the greenback, or 75.18 U.S.
cents. The currency touched its weakest intraday level since
Nov. 21 at 1.3322.
    For the week, the loonie was down 0.5% as investors worried
that the slump in crude oil prices amid the coronavirus outbreak
in China would weigh on Canada's commodity-linked economy.
    Speculators have slashed their bullish bets on the Canadian
dollar to a five-week low, data from the U.S. Commodity Futures
Trading Commission and Reuters calculations showed. As of Feb.
4, net long positions had fallen to 18,563 contracts from 
34,590 in the prior week.
    The price of oil, one of Canada's major exports, fell as
Russia said it would need more time before committing to output
cuts along with OPEC and other producers amid falling demand for
crude as China deals with the coronavirus. U.S. crude oil
futures        were down 1% at $50.42 a barrel.             
    Wall Street pulled back from record levels after a four-day
rally as investors braced for the next developments involving
the virus and digested a report showing U.S. job growth
accelerated last month.             
    Canada added 34,500 jobs in January, more than twice the
number markets were expecting, and the unemployment rate dipped
to a near record low 5.5%, Statistics Canada data indicated.
            
    It was "another encouraging report for Canada's economy
around the turn of the year that in turn adds to the backing for
the BoC to maintain steady rates in the near term," said Ryan
Brecht, a senior economist at Action Economics.
    Chances that the Bank of Canada would cut interest rates by
April dipped to less than 40% from about 45% before the jobs
report, data from the overnight index swaps market showed.
          
    Canadian government bond yields fell across a flatter yield
curve. The 10-year yield was down 4.2 basis points at 1.327%.

 (Reporting by Fergal Smith, Editing by Franklin Paul and Grant
McCool)
  
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