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CANADA FX DEBT-C$ hits a 6-week low as oil slumps on tariff threat

Published 2019-08-01, 05:05 p/m
© Reuters.  CANADA FX DEBT-C$ hits a 6-week low as oil slumps on tariff threat
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* Canadian dollar falls 0.2% against the greenback

* Oil prices decrease by 7.9%

* Bond prices move higher across the maturity curve

By Levent Uslu

TORONTO, Aug 1 (Reuters) - The Canadian dollar weakened to a six-week low against its U.S. counterpart on Thursday as oil prices slumped, pressured by the prospect of additional U.S. tariffs on Chinese goods.

In a series of tweets, U.S. President Donald Trump said he would slap 10% tariffs on $300 billion of Chinese imports starting Sept. 1. comments had a "knock-on effect on commodities, particularly oil," said Michael Goshko, corporate risk manager at Western Union business solutions. "The Canadian dollar is a particularly oil-sensitive currency."

The price of oil, one of Canada's major exports, fell to the lowest level in about six weeks. U.S. crude oil futures CLc1 settled 7.9% lower at $53.95 a barrel. 4:39 p.m. (2039 GMT), the Canadian dollar CAD=D4 was trading 0.2% lower at 1.3213 to the greenback, or 75.68 U.S. cents. The currency, which fell 0.8% against the U.S. dollar in July, hit its lowest intraday level since June 20 at 1.3248.

The loonie lost ground despite data showing that Canadian manufacturing activity expanded for the first time in four months in July. The IHS Markit Canada Manufacturing Purchasing Managers' index (PMI) rose to a seasonally adjusted 50.2 last month from 49.2 in June. PMI data helped limit the decline for the Canadian dollar, said Simon Harvey, a market analyst at Monex Canada and Monex Europe.

Firm domestic data has supported the Bank of Canada's view that the economy is picking up, Harvey said.

Canadian government bond prices were higher across the yield curve, with the two-year CA2YT=RR up 13 Canadian cents to yield 1.479% and the 10-year CA10YT=RR rising 74 Canadian cents to yield 1.399%.

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