April 24, 2020 / 8:22 PM / a month ago

CANADA FX DEBT-Canadian dollar weakens as bleak prospects for oil output weigh

 (New throughout; adds strategists comments and updates prices)
    * Canadian dollar falls 0.1% against the greenback
    * Loonie weakens 0.8% for the week
    * Canada plans to help small businesses with rent payments
    * Canadian bond yields trade mixed across a flatter curve

    By Fergal Smith
    TORONTO, April 24 (Reuters) - The Canadian dollar weakened
against its U.S. counterpart on Friday as investors reasoned
that the potential for oil production cuts would hurt prospects
for the commodity-linked currency, with the loonie adding to its
decline for the week.
    At 3:41 p.m. (1941 GMT), the Canadian dollar          was
trading 0.1% lower at 1.4088 to the greenback, or 70.98 U.S.
cents. The currency, which was down 0.8% for the week, traded in
a range of 1.4026 to 1.4120.
    "Rapidly filling (oil) storage capacity will likely result
in further cuts to Canadian production, which should keep CAD
upside limited for now," Ronald Simpson, managing director,
global currency analysis at Action Economics, said in a note.
    U.S. crude oil futures        were up about 3.4% at $17.06 a
barrel but lost ground for the third straight week as production
shutdowns failed to keep pace with sliding demand.             
    On Monday, U.S. oil fell into negative territory for the
first time, to minus $37.63 a barrel. Oil is one of Canada's
major exports, so the crash in crude prices could hurt the
domestic economy, which is already reeling from the coronavirus
outbreak.
    Mounting economic damage and the Bank of Canada's reluctance
to reduce interest rates below 0.25% are pointing to increased
quantitative easing in Canada, TD Securities strategists,
including Andrew Kelvin, said in a note.
    Kelvin expects asset purchases by the central bank to reach
C$500 billion over the next two years.
    The Bank of Canada has begun buying Government of Canada
bonds and other assets to support the economy, while Ottawa is
rolling out more than C$100 billion in direct aid as well as
credit support measures and deferral of tax payments.
    Canada will help small businesses with rent payments and
craft guidelines for regions less affected by the coronavirus
outbreak to open their economy, Canadian Prime Minister Justin
Trudeau said on Friday.              
    Canadian government bond yields were mixed across a flatter
curve, with the 10-year             down 1.8 basis points at
0.582%.

 (Reporting by Fergal Smith
Editing by Nick Zieminski and Jonathan Oatis)
  
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