C$ hits 6-week low as COVID-19 sparks 'tsunami of risk aversion'

TORONTO: The Canadian dollar fell to a six-week low against its broadly stronger US counterpart on Wednesday as investors ditched commodity-linked currencies due to worries about rising coronavirus cases, while Ottawa promised more economic support.

The loonie was trading 0.6% lower at 1.3376 to the greenback, or 74.76 US cents. The loonie touched its weakest intraday level since Aug. 10 at 1.3381, while the safe-haven US dollar expanded on its eight-week high.

"A second wave of coronavirus infections in a number of major economies has unleashed a tsunami of risk aversion," said Karl Schamotta, chief market strategist at Cambridge Global Payments. "Traders are selling economically sensitive currencies like the Canadian dollar."

Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to the global flow of trade.

Australia and New Zealand are also major commodity producers. Their currencies fell by more than 1%, while shares on Wall Street tumbled as data showing a slowdown in domestic business activity and a stalemate in Congress over more coronavirus relief raised fears of a choppy economic recovery from a pandemic-driven recession.

Canada's Liberal government promised major new investments and policy initiatives to help the country recover from the coronavirus pandemic, saying "this is not the time for austerity".

Economic growth in Canada has rebounded sharply in recent months, but the country faces a resurgence in coronavirus cases.

The price of oil, one of Canada's major exports, was supported by US government data that showed crude and fuel inventories dropped last week, although concerns about the ongoing pandemic capped gains.

US crude oil futures settled 0.3% higher at $39.93 a barrel, while Canadian government bond yields were little changed across the curve, with the 10-year trading at 0.555%.