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Loonie slides as trade threats weigh on commodity-linked currencies

Published 2020-05-01, 05:01 p/m
© Reuters.
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* Canadian dollar falls 0.9% against the greenback

* Canada names Tiff Macklem as its next central bank governor

* Canadian manufacturing PMI falls to a record low

* For the week, the loonie gains 0.2%

By Fergal Smith

TORONTO, May 1 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Friday as domestic data showed a plunge in factory activity to a record low and the United States threatened China with new tariffs, with the loonie giving back much of this week's rally.

U.S. President Donald Trump said his administration was crafting retaliatory measures against China as punishment for the coronavirus outbreak, once again sparking tariff fears that rattled markets through much of the last two years. runs a current account deficit and is a major exporter of commodities, including oil, so the domestic economy tends to be dependent on the global flow of trade and capital.

The loonie was "broadly lower" along with other commodity-linked currencies, said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York. "It broke resistance at 1.4050 and took off."

The currencies of Australia AUD= , New Zealand NZD= and Norway NOK= , countries that also depend on commodity exports, also lost ground.

At 3:38 p.m. (1938 GMT), the Canadian dollar CAD=D4 was trading 0.9% lower at 1.4064 to the greenback, or 71.10 U.S. cents. The currency, which traded in a range of 1.3936 to 1.4110, was up 0.2% for the week.

Canada named Tiff Macklem, a former senior deputy at the Bank of Canada, as its next central bank governor. He brings familiarity to the job that could prove helpful as the Canadian economy is pounded by the coronavirus pandemic and low oil prices. a news conference, Macklem said that in the current situation he sees the present level of interest rates, at 0.25%, as the "effective lower bound," matching the position of current Bank of Canada Governor Stephen Poloz.

The IHS Markit Canada Manufacturing PMI fell to a seasonally adjusted 33.0 in April from 46.1 in March, as the coronavirus outbreak prompted some factories to halt production and new orders crumbled, data showed. have increased their bearish bets on the Canadian dollar, data from the U.S. Commodity Futures Trading Commission showed. As of April 27, net short positions had increased to 29,044 contracts from 23,891 in the prior week.

U.S. crude oil futures CLc1 ended 5% higher at $19.78 a barrel as OPEC and its allies began a record output cut to tackle a supply glut weighing on the market. bond yields were mixed across a flatter yield curve, with the 10-year down 2.2 basis points at 0.526%.

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