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Markets

Loonie extends monthly decline to 1.7pc as virus fears weigh

The Canadian dollar was trading 0.1pc lower at 1.3221 to the greenback, or 75.64 U.S. cents. The loonie was do
31 Jan 2020
  • The Canadian dollar was trading 0.1pc lower at 1.3221 to the greenback, or 75.64 U.S. cents.
  • The loonie was down 1.7pc, its biggest monthly decline since December 2018. It follows a 5pc gain in 2019, when the loonie was the top-performing G10 currency.
  • The Bank of Canada left the door open to an interest rate cut should a recent slowdown in domestic growth persist.

TORONTO: The Canadian dollar weakened to a seven-week low against the greenback on Friday, adding to its monthly decline as the coronavirus weighed on sentiment, but some of the loonie's decline was pared after data showed growth in Canada's economy.

At 9:12 a.m. (1412 GMT), the Canadian dollar was trading 0.1pc lower at 1.3221 to the greenback, or 75.64 U.S. cents.

The currency touched its weakest intraday level since Dec. 10 at 1.3245.

For January, the loonie was down 1.7pc, its biggest monthly decline since December 2018. It follows a 5pc gain in 2019, when the loonie was the top-performing G10 currency.

Canadian gross domestic product edged up by 0.1pc in November as increases in utilities as a result of a cold weather snap helped to offset the effects of a rail strike, Statistics Canada said on Friday. Analysts had forecast no change.

"The return to growth in Canada's economy during November suggests that activity at the end of the year was not quite as poor as feared," said Ryan Brecht, a senior economist at Action Economics.

Last week, the Bank of Canada left the door open to an interest rate cut should a recent slowdown in domestic growth persist.

Money markets see about a 50pc chance that the central bank will ease by April.

A potential risk to Canada's economic outlook could be a slowdown in the global economy due to China's coronavirus epidemic.

Worries over the fallout from the virus weighed on world shares, which were heading for their biggest weekly losses since August, while oil and metals markets were showing even more brutal damage.

Oil, one of Canada's major exports, has fallen more-than 20pc from this month's peak to about $52 a barrel.

Canadian government bond yields were lower across a flatter yield curve, with the 10-year yield falling 3.8 basis points to 1.292pc.

On Thursday, the 10-year yield touched its lowest intraday level since Oct. 8 at 1.276pc.