Canadian dollar weakens as bleak prospects for oil output weigh By Reuters

© Reuters.

* Canadian dollar falls 0.1% against the greenback

* Loonie weakens 0.8% for the week

* Canada plans to help small businesses with rent payments

* Canadian bond yields trade mixed across a flatter curve

By Fergal Smith

TORONTO, April 24 (Reuters) – The Canadian dollar weakened against its U.S. counterpart on Friday as investors reasoned that the potential for oil production cuts would hurt prospects for the commodity-linked currency, with the adding to its decline for the week.

At 3:41 p.m. (1941 GMT), the Canadian dollar CAD=D4 was trading 0.1% lower at 1.4088 to the greenback, or 70.98 U.S. cents. The currency, which was down 0.8% for the week, traded in a range of 1.4026 to 1.4120.

“Rapidly filling (oil) storage capacity will likely result in further cuts to Canadian production, which should keep CAD upside limited for now,” Ronald Simpson, managing director, global currency analysis at Action Economics, said in a note.

U.S. crude oil futures were up about 3.4% at $17.06 a barrel but lost ground for the third straight week as production shutdowns failed to keep pace with sliding demand. Monday, U.S. oil fell into negative territory for the first time, to minus $37.63 a barrel. Oil is one of Canada’s major exports, so the crash in crude prices could hurt the domestic economy, which is already reeling from the coronavirus outbreak.

Mounting economic damage and the Bank of Canada’s reluctance to reduce interest rates below 0.25% are pointing to increased quantitative easing in Canada, TD Securities strategists, including Andrew Kelvin, said in a note.

Kelvin expects asset purchases by the central bank to reach C$500 billion over the next two years.

The Bank of Canada has begun buying Government of Canada bonds and other assets to support the economy, while Ottawa is rolling out more than C$100 billion in direct aid as well as credit support measures and deferral of tax payments.

Canada will help small businesses with rent payments and craft guidelines for regions less affected by the coronavirus outbreak to open their economy, Canadian Prime Minister Justin Trudeau said on Friday. government bond yields were mixed across a flatter curve, with the 10-year down 1.8 basis points at 0.582%.

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