Canadian dollar dips as new virus strain weighs on oil

TORONTO: The Canadian dollar edged lower against its US counterpart on Tuesday along with lower oil prices, as a new strain of the coronavirus capped optimism of a vaccine-led recovery in the global economy.

The Canadian dollar was trading 0.2% lower at 1.2880 to the greenback, or 77.64 US cents. The currency traded in a range of 1.2843 to 1.2888, after hitting a near three-week low on Monday at 1.2955.

"The markets will continue to assess the threat from the new strain of virus and the more stringent lockdowns," analysts at Action Economics said in a note.

Oil, one of Canada's major exports, added to losses from the previous session as a new coronavirus strain in the United Kingdom revived concerns over demand recovery. US crude prices were down 1.4% at $47.32 a barrel.

The US dollar rose against a basket of major currencies as the closing of key trade routes, due to the new strain, weighed on the euro and the pound, while time was running out to strike a post-Brexit trade deal.

Ontario, Canada's most populous province, on Monday announced a partial shutdown of some businesses starting Dec. 26 and banned most indoor gatherings as it struggles to control a second wave of COVID-19.

Last week, Bank of Canada Governor Tiff Macklem said that Canada's economy could contract in the first quarter of 2021 as rising infections dampen near-term growth.

Canada's GDP report for October is due on Wednesday.

Canadian government bond yields eased slightly across the curve in sympathy with US Treasuries. The 10-year was down 1 basis point at 0.719%, having touched a near three-week intraday low of 0.690% on Monday.