TORONTO: The Canadian dollar fell to a 1-week low against its broadly firmer US counterpart on Thursday, pressured by lower oil prices and the Bank of Canada's more dovish tone.
The loonie's losses occurred a day after Bank of Canada policymakers said they had considered adding more monetary stimulus and that export weakness could be harder to turn around than they had thought.
It was "another down day for the Canadian dollar," as oil fell and as the Bank of Canada's comments helped widen interest rate differentials between the US and Canada, said Scott Smith, senior market analyst at Cambridge Global Payments.
Canada's 2-year yield fell 3.2 basis points further below its US equivalent, to leave the spread at -27.3 basis points. It was -21.1 basis points before the Bank of Canada interest rate decision on Wednesday.
US crude prices settled $1.17 lower at $50.43 a barrel as a resurgent US dollar encouraged players to take profit on the previous day's rally that sent US crude to 15-month highs.
The Canadian dollar ended at C$1.3222 to the greenback, or 75.63 US cents, weaker than Wednesday's close of C$1.3127, or 76.18 US cents.
The currency's strongest level of the session was C$1.3115, while it touched its weakest since Oct. 13 at C$1.3231.
Canadian Finance Minister Bill Morneau said he would provide an update on the government's economic and fiscal situation on Nov. 1, which would take into consideration recommendations by an economic advisory council that included creating an infrastructure development bank and boosting immigration.
Canadian government bond prices were higher across the yield curve, with the two-year up 2.5 Canadian cents to yield 0.55 percent and the benchmark 10-year rising 20 Canadian cents to yield 1.171 percent.
Canada's inflation report for September is due on Friday. Annual inflation is expected to pick up to 1.5 percent after slipping towards the lower end of the Bank of Canada's targeted range a month earlier.
Also on Friday, retail sales are expected to have increased 0.3 percent in August, rebounding from a decline a month before.
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