Loonie hits two-and-a-half month low as coronavirus worries offset jobs gain

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto, January 23, 2015. REUTERS/Mark Blinch (CANADA - Tags: BUSINESS)

TORONTO (Reuters) - The Canadian dollar fell to a two-and-a-half month low against the greenback on Friday as the coronavirus outbreak weighed on investor sentiment, offsetting reduced bets for a Bank of Canada interest rate cut after domestic data showed a solid jobs gain.

Canada added 34,500 jobs in January, more than twice the number markets were expecting, and the unemployment rate dipped to a near record low 5.5%, Statistics Canada data indicated.

It was “another encouraging report for Canada’s economy around the turn of the year that in turn adds to the backing for the BoC to maintain steady rates in the near term,” said Ryan Brecht, a senior economist at Action Economics.

Chances that the Bank of Canada would cut interest rates by April dipped to less than 40% from about 45% before the jobs report, data from the overnight index swaps market showed. BOCWATCH

At 9:19 a.m. (1419 GMT), the Canadian dollar CAD=D4 was trading 0.2% lower at 1.3309 to the greenback, or 75.14 U.S. cents. The currency touched its weakest intraday level since at Nov. 21 at 1.3322.

For the week, the loonie was down 0.5% as investors worried that the recent slump in crude oil prices due to the coronavirus outbreak in China would weigh on Canada’s commodity-linked economy.

The price of oil, one of Canada’s major exports, fell as Russia said it would need more time before committing to output cuts along with OPEC and other producers amid falling demand for crude as China battles the coronavirus epidemic.

U.S. crude oil futures CLc1 were down 1.2% at $50.36 a barrel, while stocks .WORLD globally fell as investors wavered over the impact of the coronavirus and assessed the U.S. employment report for January that showed acceleration in jobs growth but included a downward revision to certain previous numbers.

Canadian government bond yields declined across a flatter yield curve. The 10-year yield was down 2.9 basis points at 1.336%.

Reporting by Fergal Smith, Editing by Franklin Paul