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CANADA FX DEBT-C$ slides by most in 7 weeks as pandemic spooks investors

Credit: REUTERS/Mark Blinch

The Canadian dollar weakened to a three-week low against its U.S. counterpart on Wednesday, as investors worried that rising coronavirus cases would slow global economic recovery and the Bank of Canada underscored the more uncertain outlook.

(Adds strategist quotes and details throughout, updates prices)

* Loonie hits a 3-week low at 1.3333

* Price of U.S. oil falls 6.2%

* Canadian bond yields ease across a flatter curve

By Fergal Smith

TORONTO, Oct 28 (Reuters) - The Canadian dollar weakened to a three-week low against its U.S. counterpart on Wednesday, as investors worried that rising coronavirus cases would slow global economic recovery and the Bank of Canada underscored the more uncertain outlook.

The Canadian dollar was trading 1% lower at 1.3311 to the greenback, or 75.13 U.S. cents, its biggest decline since Sept. 8. It touched its weakest intraday level since Oct. 7 at 1.3333.

"Today we found out that markets are reluctant to look past the looming (U.S.) election and pandemic risks," said Adam Button, chief currency analyst at ForexLive. "There are few currencies more vulnerable to a global growth slowdown than the Canadian dollar."

Shares around the world tumbled as coronavirus infections grew rapidly in Europe and the United States, igniting fears of possible strict lockdown measures that could damage already fragile economic recoveries.

Canada is a major exporter of commodities, including oil, so the loonie tends to be sensitive to prospects for global growth.

U.S. crude prices were down 6.2% at $37.13 a barrel as a surge in U.S. crude stocks and rising coronavirus infections fanned fears of a supply glut and weaker fuel demand.

The Bank of Canada said it expects interest rates to remain at current record lows until 2023 and reduced the size of its asset purchase program as it shifted to buying more longer-term bond. It said that a second wave of coronavirus infections would have a pronounced impact on near-term economic growth.

"If you were looking for any kind of economic confidence from the Bank of Canada, you didn't get it," Button said.

Canadian government bond yields were lower across a flatter curve, with the 10-year down 1.3 basis points at 0.584%. (Reporting by Fergal Smith; editing by Jonathan Oatis and Emelia Sithole-Matarise) ((fergal.smith@thomsonreuters.com; +1 647 480 7446;)) Keywords: CANADA FOREX/ (UPDATE 1)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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