TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday as signs of acceleration in coronavirus cases worried investors and Fitch lowered Canada’s sovereign rating to below AAA for the first time since August 2004.
Global shares fell as a rising number of coronavirus cases in the United States, China, Latin America and India dampened hopes of a swift recovery in the global economy.
The loonie’s decline “today is related more to global capital flows than domestic events,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.
Canada runs a current account deficit and is a major producer of commodities, including oil, so the loonie tends to be sensitive to the flow of trade and capital.
U.S. crude prices settled 5.9% lower at $38.01 a barrel, pressured by record-high inventories as well as worries about a second wave of the pandemic.
Fitch downgraded Canada’s sovereign rating for the first time, to “AA+” from “AAA,” citing deterioration of the country’s public finances in 2020 because of the COVID-19 pandemic.
The Canadian dollar was trading 0.5% lower at 1.3607 to the greenback, or 73.49 U.S. cents. The currency, which traded on Tuesday at its strongest intraday level in nearly two weeks at 1.3482, traded in a range of 1.3527 to 1.3617.
Canadian house prices will rise at a much slower pace this year than predicted only three months ago and will fall in 2021 as the coronavirus pandemic pushes up unemployment, curtailing immigration and the demand for homes, a Reuters poll showed on Wednesday.
Canadian government bond yields were mixed across a steeper curve, with the 30-year yield up 1.8 basis points at 1.031%.
Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter Cooney
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