C$ drops to near one-year low as trade tensions weigh on oil

TORONTO: The Canadian dollar weakened to a nearly one-year low against its US counterpart on Tuesday as an escalating trade dispute between the United States and China pressured global stock and commodity markets.

At 4 p.m. EDT (2000 GMT), the Canadian dollar was trading 0.6 percent lower at C$1.3287 to the greenback, or 75.26 US cents.

The loonie, which is sensitive to movement in crude oil prices, touched its weakest level since June 23, 2017 at C$1.3291.

"This was probably a decline related to commodity prices," said Colin Cieszynski, chief market strategist at SIA Wealth Management. "The trade news devastated commodities today."

Equity and oil prices fell after US President Donald Trump on Monday threatened to impose a 10 percent tariff on $200 billion of Chinese goods, which Beijing warned it would fight back against with "qualitative" and "quantitative" measures.

Investors have been concerned the trade spat between the two economic giants could slow global growth.

US crude oil futures settled 1.2 percent lower at $65.07 a barrel. Oil is one of Canada's major exports.

Canada runs a current account deficit, so its currency tends to weaken when risk appetite sours. The country has its own trade feud with the United States and is in slow-moving talks with the US and Mexico to revamp the North American Free Trade Agreement.

Canadian government bond prices were higher across a flatter yield curve in sympathy with Treasuries as the trade spat lifted demand for safe-haven assets.

The two-year rose 5.5 Canadian cents to yield 1.843 percent and the 10-year climbed 36 Canadian cents to yield 2.162 percent.

The two-year yield fell 2.1 basis points further below its US equivalent to a spread of -70.6 basis points, its widest since March 2007.

Canadian inflation data for May and the April retail sales report are due out on Friday.