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Canadian dollar hits a 20-month low as recession fears weigh

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·2 min read
FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto
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By Fergal Smith

TORONTO (Reuters) - The Canadian dollar on Tuesday posted its biggest decline since August last year against its broadly stronger U.S. counterpart as investors ditched currencies and other assets that are sensitive to the global economic outlook.

The loonie was trading 1.3% lower at 1.3030 to the greenback, or 76.75 U.S. cents, after touching its weakest since November 2020 at 1.3083.

"We haven't seen a lot of data or headlines today that have driven any kind of catalyst in this big risk-off (move) but we have seen major moves in pretty much all of G10 FX," said Jay Zhao-Murray, a market analyst at Monex Canada Inc.

"It's suggestive that what has occurred this morning is that recession fears have been growing."

Equity markets globally fell, the safe-haven U.S. dollar jumped against a basket of major currencies and the price of oil, one of Canada's major exports tumbled.

U.S. crude oil futures settled 8.2% lower at $99.50 a barrel as investors worried that a slowdown in the global economy would reduce demand for energy.

Canadian building permits rose by 2.3% in May from April, domestic data showed.

Canada's employment report for June is due on Friday, which could help guide expectations for a supersized interest rate hike next week by the Bank of Canada.

Money markets expect the central bank to raise its benchmark rate by three-quarters of a percentage point, which would be its biggest hike in 24 years.

Canadian government bond yields were lower across a flatter curve, tracking the move in U.S. Treasuries. The 10-year touched its lowest since June 3 at 3.033% before rebounding to 3.083%, down 9.2 basis points on the day.

(Reporting by Fergal Smith; Editing by Mark Heinrich and David Gregorio)

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