Off The Wire
Canadian dollar falls as BoC matches U.S. rate cut on coronavirus threat
(Adds details on activity and updates prices)
* Canadian dollar falls 0.1% against the greenback
* Bank of Canada cuts benchmark interest rate by 50 basis points
* Price of U.S. oil increases 2.1%
* Canada's 10-year yield hits a record low below 0.900%
By Fergal Smith TORONTO, March 4 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday as the Bank of Canada delivered its biggest interest rate cut in more than 10 years, matching the previous day's cut in U.S. rates, and signaled that it was ready to ease further due to the coronavirus outbreak.
The central bank slashed its benchmark interest rate to 1.25% from 1.75%, saying the outbreak was "a material negative shock" to the Canadian and global outlooks. It was the first the Bank of Canada had cut by more than 25 basis points since March 2019, when the economy was in recession due to the global financial crisis.
The Federal Reserve cut U.S. rates 50 basis on Tuesday. "The virus is expected to take a greater toll on Canada's economy than the U.S.'s due to weaker commodity prices and less underlying strength," Sal Guatieri, a senior economist at BMO Capital Markets said in a note.
"Lower rates are no vaccine, but they can partially treat the symptoms of the virus by supporting confidence and shoring up financial conditions," Guatieri said. Canada is prepared to act quickly to help companies hurt financially by the outbreak of the new coronavirus and would not need to wait for the next budget, Finance Minister Bill Morneau said on Tuesday.
At 10:30 a.m. (1530 GMT), the Canadian dollar was trading 0.1% lower at 1.3394 to the greenback, or 74.66 U.S. cents. The currency traded in a range of 1.3330 to 1.3417.
The price of oil, one of Canada's major exports, rose on expectations that major producers have moved closer to an agreement to enact deeper output cuts aimed at offsetting the slump in demand caused by the coronavirus outbreak. U.S. crude oil futures were up 2.1% at $48.15 a barrel.
Canadian government bond yields were lower across a steeper yield curve. The 10-year fell 8.1 basis points to hit a record low at 0.883%, while the gap between the 10-year and its U.S. equivalent widened by 3.7 basis points to a spread of 9 basis points in favor of the U.S. bond.
Canadian labor productivity fell by 0.1% in the fourth quarter, as both hours worked and business output were little changed, Statistics Canada said. Compared to the same quarter in 2019, productivity was up 0.5%. Canada's jobs report for February is due on Friday.
(Reporting by Fergal Smith; Editing by David Gregorio)