C$ slides by most in 7 weeks as pandemic spooks markets

10/28/2020 | 03:33pm

TORONTO (Reuters) - The Canadian dollar weakened to a three-week low against its U.S. counterpart on Wednesday, as investors worried that rising coronavirus cases would slow global economic recovery and the Bank of Canada underscored the more uncertain outlook.

The Canadian dollar was trading 1% lower at 1.3313 to the greenback, or 75.11 U.S. cents, its biggest decline since Sept. 8. It touched its weakest intraday level since Oct. 7 at 1.3333.

"Today we found out that markets are reluctant to look past the looming (U.S.) election and pandemic risks," said Adam Button, chief currency analyst at ForexLive. "There are few currencies more vulnerable to a global growth slowdown than the Canadian dollar."

Shares around the world tumbled as coronavirus infections grew rapidly in Europe and the United States, igniting fears of possible strict lockdown measures that could damage already fragile economic recoveries.

Canada is a major exporter of commodities, including oil, so the loonie tends to be sensitive to prospects for global growth.

U.S. crude oil futures settled 5.5% lower at $37.39 a barrel as a surge in U.S. crude stocks and rising coronavirus infections fanned fears of a supply glut and weaker fuel demand.

The Bank of Canada said it expects interest rates to remain at current record lows until 2023 and reduced its bond-buying program to C$4 billion per week from C$5 billion while tweaking purchases toward longer-term bonds. It said that a second wave of coronavirus infections would have a pronounced impact on near-term economic growth.

"If you were looking for any kind of economic confidence from the Bank of Canada, you didn't get it," Button said.

Canadian government bond yields were mixed across a flatter curve, with the 30-year down 1.3 basis points at 1.175%.

(Reporting by Fergal Smith; editing by Jonathan Oatis and Emelia Sithole-Matarise)

By Fergal Smith

© Reuters 2020
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