TORONTO: The Canadian dollar weakened against its U.S. counterpart on Thursday, extending its pullback from a seven-week high the day before, as oil prices fell and investors awaited a Bank of Canada report on risks to the stability of the financial system.
The loonie was down 0.2% at 1.2580 to the greenback, or 79.49 U.S. cents, after trading in a range of 1.2550 to 1.2588. On Wednesday, it touched its strongest intraday level since April 21 at 1.2515.
The BoC’s annual Financial System Review, due at 10 a.m. ET (1400 GMT), could provide an update on Canadian household vulnerabilities as the central bank races ahead with a series of oversized interest rate hikes to curb inflation. Canada has the highest level of household debt in the G7.
The price of oil, one of Canada’s major exports, dipped after parts of Shanghai imposed new COVID-19 lockdown measures although China’s stronger-than-expected exports in May offered a boost to the demand outlook.
U.S. crude prices were down 0.7% at $121.29 a barrel, while the U.S. dollar fell against a basket of major currencies as the European Central Bank ended a long-running stimulus scheme and signaled a series of rate hikes.
Investors awaited U.S. inflation data on Friday, which could offer clues on the Federal Reserve policy outlook. Canada’s jobs report for May is also due for release on Friday.
Canadian government bond yields were higher across the curve, tracking the move in U.S. Treasuries and German Bunds.
The 10-year touched its highest since April 2011 at 3.308% before dipping slightly to 3.297%, up 2.5 basis points on the day.
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