Canadian dollar gives back 2021 gains as risk appetite crumbles

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

TORONTO (Reuters) - The Canadian dollar weakened to a five-month low against its U.S. counterpart on Monday as a worldwide surge in coronavirus cases weighed on investor sentiment, with the currency shifting into negative territory since the start of the year.

The safe-haven U.S. dollar rallied and stocks globally were facing their longest losing streak since the pandemic first hit global markets 18 months ago, as the continued spread of the highly-contagious Delta variant raised doubts about the strength of economic recovery.

Canada is a major producer of commodities, including oil, so the loonie is sensitive to global economic prospects.

U.S. crude oil futures fell 3.5% to $69.27 a barrel after OPEC+ overcame internal divisions and agreed to boost output, sparking concerns about a crude surplus.

The Canadian dollar was trading 1.1% lower at 1.2749 to the greenback, or 78.44 U.S. cents, its biggest decline in nearly five months. It touched its weakest intraday level since Feb. 5 at 1.2807.

The currency has slumped 5.9% since notching in June a six-year high near 1.20, while it is down 0.1% since the start of 2021.

Speculators have cut their bullish bets on the Canadian dollar to the lowest level in ten weeks, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of July 13, net long positions had fallen to 26,376 contracts from 41,178 in the prior week.

Canadian government bond yields were lower across a flatter curve, tracking the move in U.S. Treasuries. The 10-year touched its lowest level since Feb. 19 at 1.170% before recovering slightly to 1.176%, down 6.5 basis points on the day.

(Reporting by Fergal Smith; Editing by Nick Zieminski)