The Canadian dollar weakened against its U.S. counterpart on Monday [May 11] as the potential for a second wave of coronavirus infections worried investors, with the loonie retreating from an earlier 11-day high.
The Canadian dollar was trading 0.6 per cent lower at 1.4008 to the greenback, or 71.39 U.S. cents. The currency, which strengthened 1.1 per cent last week, touched its strongest intraday level since April 30 at 1.3901.
“Its not really a CAD story since the USD is up across all the majors today,” said Tony Valente, senior FX dealer at AscendantFX. “Over the last few weeks, the CAD has been more correlated to risk sentiment then oil prices.”
The U.S. dollar, seen as a safe-haven currency, rose against a basket of major currencies as Germany and South Korea reported a surge in COVID-19 cases after easing lockdowns.
Canada runs a current account deficit and is a major exporter of commodities, including oil, so the loonie tends to be sensitive to the global flow of trade and capital.
Newly appointed Bank of Canada Governor Tiff Macklem projected a halting economic recovery during an interview with Reuters conducted before he was named, suggesting he would continue the central bank’s loose monetary policy approach.
Canada said on Monday it would create a bridge financing facility for large employers and the expansion of its lending program to middle-sized businesses that need support to get through the economic downturn caused by the coronavirus.
Data on Friday showed that Canada lost a record-breaking 2 million jobs in April and that speculators had increased their bearish bets on the Canadian dollar to the heaviest since last June.
Canadian government bond yields were little changed across the curve on Monday, with the 10-year yield at 0.586 per cent.
This was reported in the May 12, 2020 edition of The Globe and Mail.