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Canadian dollar notches 11-day high on coronavirus optimism

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

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar strengthened to an 11-day high against its U.S. counterpart on Tuesday as hopes rose that the spread of the coronavirus pandemic was slowing and the greenback lost ground against a basket of major currencies.

At 4:20 p.m. (2020 GMT), the Canadian dollar <CAD=> was trading 0.9% higher at 1.3990 to the greenback, or 71.48 U.S. cents.

The currency touched its strongest intraday level since March 27 at 1.3945, while the one-month rate for bankers' acceptances, a measure of Canadian financial system stress, was lower for the eighth straight day at 0.8%.

"We have seen a little bit more positive risk sentiment in the marketplace," said Amo Sahota, director at Klarity FX in San Francisco.

Also helping the loonie has been "rotation out of the big U.S. dollar into other currencies," Sahota said.

World stock markets <.WORLD> rose, although Wall Street gave up its earlier gains, and the U.S. dollar weakened as signs of progress against the coronavirus in both Europe and the United States and some more liberal helpings of stimulus supported risk appetite.

Canada runs a current account deficit and is a major producer of commodities, including oil, so the loonie tends to be sensitive to the global flow of trade and capital.

U.S. crude oil futures <CLc1> settled 9.4% lower at $23.63 a barrel in the face of swelling crude supplies and weak fuel demand because of the coronavirus pandemic, while investors also grew cautious over expectations that the world's biggest producers would quickly agree on output cuts.

Canadian purchasing activity contracted at a pace that was much weaker than expected in March, Ivey Purchasing Managers Index (PMI) data showed, in the latest sign of the damage to the economy from the coronavirus pandemic.

Many Canadian small businesses reeling from losses due to the coronavirus outbreak may be ineligible for federal government and bank aid designed to help them survive, industry experts say, with several already shuttered or rapidly running out of cash.

Canadian government bond yields were higher across a steeper curve in sympathy with U.S. Treasuries. The 10-year <CA10YT=RR> rose 5.9 basis points to 0.822%, having touched its highest intraday level since March 27 at 0.857%.


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