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The Canadian dollar strengthened against the greenback on Tuesday as investors became less fearful of the economic fallout from China’s spreading coronavirus, with the loonie recovering from a near seven-week low it hit earlier in the day.

At 3:28 p.m. (2028 GMT), the Canadian dollar was trading 0.2 per cent higher at 1.3167 to the greenback, or 75.95 U.S. cents. The currency touched its weakest intraday level since Dec. 11 at 1.3206.

“We had a risk-back-on day because everyone was tired of panicking over the coronavirus.” said Ronald Simpson, managing director, global currency analysis at Action Economics. “Oil prices recovered, which took the loonie off its seven-week lows.”

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The price of oil, one of Canada’s major exports, rose after falling for five days, gaining support from a rebound in Wall Street stocks and talk that OPEC and its allies might tighten the market amid fears the coronavirus could weigh on oil demand. U.S. crude oil futures settled 0.6 per cent higher at $53.48 a barrel.

The Canadian dollar has weakened 1.3 per cent since the start of the year after rallying 5 per cent in 2019, when it was the top-performing G10 currency.

Canada’s gross domestic product data for November is due on Friday, which could help guide expectations for a Bank of Canada interest rate cut.

Last week, the central bank left its benchmark interest rate steady at 1.75 per cent, as expected, but said a future cut was possible should a recent slowdown in domestic growth persist.

Canadian government bond yields moved higher across the yield curve in sympathy with U.S. Treasuries on Tuesday as risk appetite improved. The 10-year yield rose by 5.4 basis points to 1.357 per cent, rebounding after it hit its lowest intraday level since Oct. 8 at 1.283 per cent.

The gap between Canada’s 10-year yield and its U.S. equivalent narrowed by 1.8 basis points to a spread of 28.3 basis points in favor of the U.S. bond.

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