Canadian dollar tumbles to four-year low as pressure rises on BoC to cut rates further

TORONTO (Reuters) - The Canadian dollar weakened to a four-year low against its U.S. counterpart on Tuesday as growing panic about a coronavirus-induced economic slump boosted the greenback and weak factory data added to pressure on the Bank of Canada to cut further.

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto, January 23, 2015. REUTERS/Mark Blinch/File Photo

Canadian manufacturing sales fell 0.2% in January, the fifth consecutive monthly decline.

“It does indicate that the Bank of Canada likely needed to cut rates regardless of COVID-19,” said Royce Mendes, a senior economist at CIBC Capital Markets. “That suggests the bank should be trimming rates to the effective lower bound as soon as possible.”

Last Friday, the central bank cut its key policy rate by 50 basis points to 0.75% in an emergency move.

Funding pressures in the market for U.S. dollars .DXY are growing sharply, with the greenback surging nearly 1.5% against a basket of other major currencies.

At 9:18 a.m. (1318 GMT), the Canadian dollar CAD=D4 was trading 0.8% lower at 1.4124 to the greenback, or 70.80 U.S. cents. The currency touched its weakest intraday level since January 2016 at 1.4164.

The price of oil, one of Canada's major exports, held near its lowest level since 2016 as the coronavirus pandemic hurts the demand outlook and Saudi Arabia and Russia battle for market share. U.S. crude oil futures CLc1 were down 0.2% at $28.64 a barrel.

Ontario, Canada’s most populous province, banned gatherings of more than 50 people and ordered the closure of bars and restaurants in a bid to slow the spread of the coronavirus.

On Monday, Canada closed its borders to all foreign nationals except U.S. citizens and permanent residents, with Prime Minister Justin Trudeau urging people to limit social contact to stem the spread of the virus.

Canadian government bond yields rose across the yield curve, with the 10-year yield up 1.9 basis points at 0.801%. Last week, the 10-year yield hit a record low at 0.233%.

Canada’s inflation report for February is due on Wednesday.

Reporting by Fergal Smith; Editing by Steve Orlofsky