Canadian dollar pulls back from 6-year high as commodities fall

TORONTO: The Canadian dollar weakened against its US counterpart on Wednesday as commodity prices fell sharply, while domestic data showed inflation climbing in April at the fastest pace in a decade but at a rate that was less than in the United States.

The loonie was trading 0.3% lower at 1.2106 to the greenback, or 82.60 US cents. On Tuesday, it touched its strongest level since May 2015 at 1.2013.

Inflation in Canada rose to 3.4% in April from 2.2% in March, mostly due to the statistical comparison to last year when prices sank during pandemic shutdowns, data from Statistics Canada showed.

"The numbers are within expectations, a little bit stronger, not like a big blowout we saw in the US," said Darcy Briggs, a portfolio manager at Franklin Templeton Canada. "It's just reflective of dynamics going on in COVID."

"It wasn't disjointed from consensus expectations like the US number was. I don't expect much in the way of reaction from the Bank of Canada," Briggs said.

Data last week showed US CPI shot up 4.2% in the 12 months through April.

Wall Street and commodity prices have been on a tear in recent months but were pressured on Wednesday by fears that rising inflation could force the US Federal Reserve to pare back its support soon.

Copper fell 3.3%, while oil, one of Canada's main exports, tumbled 4% to $62.87 a barrel. Rising coronavirus cases in Asia also weighed on oil.

The Bank of Canada has expressed concern about the strong dollar hurting exports, but soaring demand for commodities and a looming rebound in consumer spending are seen limiting the impact, economists said.

Canadian government bond yields edged lower across the curve, with the 10-year down about half a basis point at 1.558%.