Canadian dollar weakens as higher bond yields boost greenback
The Canadian dollar weakened against its U.S. counterpart on Wednesday as the greenback broadly rallied and domestic data showed underlying inflation holding well below the Bank of Canada’s 2% target.
The Canadian dollar was trading 0.3% lower at 1.2726 to the greenback, or 78.58 U.S. cents, having traded in a range of 1.2685 to 1.2745. On Tuesday, it touched its strongest intraday level in nearly four weeks at 1.2606.
The U.S. dollar rallied against a basket of major currencies as U.S. bond yields jumped on the prospects of further economic recovery and a possible acceleration in inflation.
Canada’s annual inflation rate in January accelerated to 1.0% from 0.7% the previous month, Statistics Canada said. The average of the Bank of Canada’s three core measures nudged up to 1.5% from 1.4% after a sharp downward revision to December’s reading for the median.
“The BoC has maintained their commitment to maintain accommodative policy for an extended period of time,” said Ryan Brecht, a senior economist at Action Economics. “This report is consistent with their policy pledge.”
The price of oil, one of Canada’s major exports, fell 0.3% to $59.88 a barrel but held close to its highest level in more than one year. Crude has been underpinned this week by a major supply disruption in the southern United States.
Canada’s 10-year yield eased 2 basis points to 1.106%, pulling back from 1.149% earlier in the session, which was its highest since March last year.
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Published at Wed, 17 Feb 2021 15:49:47 +0000