Canadian dollar hits 1-week low as Delta variant hits sentiment

·1 min read
FILE PHOTO: 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 weakened on Tuesday for a second day against its broadly stronger U.S. counterpart as new coronavirus outbreaks in Asia pressured commodity-linked currencies and investors awaited key economic data later in the week.

The loonie was trading 0.5% lower at 1.2395 to the greenback, or 80.88 U.S. cents, after ending Monday's session down 0.3%. It touched its weakest intraday level since last Tuesday at 1.2398.

"The spread of the Delta variant in less-vaccinated countries is hurting expectations for travel and trade," said Karl Schamotta, chief market strategist at Cambridge Global Payments.

It is "crushing global risk sentiment and weighing on the commodity complex," Schamotta added.

Oil reversed earlier losses, settling 7 cents higher at $72.98 a barrel, but copper, seen as a gauge of global financial health, fell for a fourth day. Canada is a major producer of both commodities.

The Australian and New Zealand dollars, which are also sensitive to commodity markets, fell even more than the loonie, while the safe-haven U.S. dollar climbed against a basket of major currencies.

Canadian GDP data for April is due on Wednesday and the U.S. nonfarm payroll report on Friday.

An upside surprise for the U.S. data has the potential to boost bond yields and the U.S. dollar, said Schamotta.

Investors could be more sensitive than usual to the U.S. jobs data, after the Federal Reserve shifted this month to more hawkish guidance.

Canadian government bond yields were mixed across the curve, with the 10-year up less than one basis point at 1.424%.

(Reporting by Fergal Smith; editing by Jonathan Oatis and Nick Zieminski)

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