Loonie hits six-day low as underlying inflation cools

TORONTO: The Canadian dollar weakened to a nearly one-week low against its US counterpart on Wednesday as stocks and oil prices fell and as domestic data showed evidence of lower underlying inflation.

Canada's annual inflation rate edged up to 2.0% in April from 1.9% in March, driven in part by a carbon levy that pushed up gasoline prices in six provinces, Statistics Canada data showed. But two of the Bank of Canada's three measures of core inflation fell.

Chances that the central bank would cut interest rates by year end were slightly higher at more than 40% after the report, the overnight index swaps market indicated.

Global stocks fell as a surprise drop in US retail sales and underwhelming data from China raised growth concerns, while investors waited for more developments in the US-China trade dispute.

Canada runs a current account deficit and exports many commodities, including oil, so its economy could be hurt by a slowdown in the global flow of capital or trade.

Oil prices declined after data showed a surprise rise in US crude inventories and the US-Chinese trade dispute threatened demand, although Middle East tensions capped losses. US crude oil futures were down 0.7% at $61.32 a barrel.

At 9:38 a.m. EDT (1338 GMT), the Canadian dollar was trading 0.1% lower at 1.3477 to the greenback, or 74.20 US cents. The currency touched its weakest intraday since May 9 at 1.3493.

Canadian home sales rose 3.6 percent in April from the previous month, adding to the sector's recovery after sales in February hit the lowest since 2012, the Canadian Real Estate Association said.

Canadian government bond prices were higher across the yield curve in sympathy with US Treasuries. The two-year rose 8.5 Canadian cents to yield 1.560% and the benchmark 10-year climbed 53 Canadian cents to yield 1.636%.

The 10-year yield touched its lowest intraday since April 1 at 1.633%.