Canadian dollar hits 1-week low as equity market volatility jumps

(Adds dealer quote and details throughout; updates prices)
* Canadian dollar dips 0.1% against the greenback
* Loonie touches a one-week low at 1.2779
* Price of U.S. oil settles nearly 1% higher
* Canadian bond yields ease across a flatter curve

By Fergal Smith
TORONTO, Jan 25 (Reuters) - The Canadian dollar weakened to
a one-week low against its U.S. counterpart on Monday, with
equity market volatility triggering demand for the greenback as
investors became jittery about prospects for U.S. fiscal
stimulus.
The loonie was trading 0.1% lower at 1.2750 to the
greenback, or 78.43 U.S. cents, having touched its weakest level
since last Monday at 1.2779.
U.S. stocks pulled back from early highs as concerns over
the timing and size of fiscal stimulus curbed optimism about the
start of a week of earning reports from mega-cap companies.

The VIX , which measures the market's expectations for
volatility, jumped by more than 10%, while the safe-haven U.S.
dollar advanced against a basket of major currencies.

"I think we are seeing the roots of a broad-based
counter-trend rally in the USD starting to take shape," said
Tony Valente, a senior FX dealer at AscendantFX.
U.S. crude prices settled nearly 1% higher at $52.77,
but gains were capped by worries that renewed lockdowns will
crimp demand. Oil is one of Canada's major exports, of which
about 75% go to the United States.
Canada is worried by U.S. President Joe Biden's plans for a
"Buy American" program to boost domestic industry and it will be
a priority for talks with the new administration, Finance
Minister Chrystia Freeland said.
Canadian government bond yields were lower across a flatter
curve in sympathy with U.S. Treasuries. The 10-year
eased 3.3 basis points to 0.813%, extending a pullback from a
10-month high on Thursday at 0.892%.
Canada's GDP data for November is due on Friday, which could
help guide Bank of Canada interest rate expectations.

(Reporting by Fergal Smith; Editing by Paul Simao and Peter
Cooney)


First Published: 2021-01-25 16:35:11
Updated 2021-01-25 22:55:55


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