C$ hits a 7-week low on rising global trade concerns

TORONTO: The Canadian dollar weakened to a near seven-week low against its US counterpart on Tuesday as investors worried about rising trade tensions between the United States and China.

A yearlong US-China trade war has boiled over as Washington accused Beijing of manipulating its currency after China let the yuan drop to its lowest point in more than a decade.

Canada exports many commodities, including oil, so its economy could be hurt by an escalation of trade tensions.

"In the last 24 hours, we've just had a lot of developments in terms of trade tensions between the US and China and those are impacting (investor) sentiments." said Eric Theoret, a currency strategist at Scotiabank.

At 3:30 p.m. (1930 GMT), the Canadian dollar was trading 0.4% lower at 1.3277 to the greenback, or 75.32 US cents. The currency hit its lowest intraday level since June 20 at 1.3291.

Last month, the Bank of Canada highlighted the risks that trade wars pose to the global economy as it left its benchmark interest rate unchanged at 1.75%.

Chances of a Bank of Canada interest rate cut this year have climbed to more than 70% from about 40% after the release of data last week showing the economy strengthened more than expected in June, the overnight index swap market indicated.

The decline for the loonie came as the price of oil was pressured by increasing global trade tensions. US crude oil futures settled 1.9% lower at $53.63 a barrel.

Canadian government bond prices were higher across the yield curve, with the two-year up 22 Canadian cents to yield 1.346% and the 10-year rising 136 Canadian cents to yield 1.234%.

The 10-year bond yield hit its lowest intraday level since November 2016 at 1.223%.