TORONTO: The Canadian dollar dipped against its US counterpart on Wednesday as a rebound in crude oil prices faded and US Federal Reserve Chair Janet Yellen left the door open to further interest rate hikes.
Yellen cited global risks in her prepared testimony to Congress, but said she expects moderate growth that will allow the US central bank to pursue "gradual" adjustments to monetary policy.
Oil reversed lower after posting its third-biggest daily fall since 2008 on Tuesday. US crude prices were down 0.29 percent to $27.86 a barrel.
At 9:03 a.m. EST (1403 GMT), the Canadian dollar was trading at C$1.3893 to the greenback, or 71.98 US cents, weaker than the Bank of Canada's official close on Tuesday of C$1.3879, or 72.05 US cents.
The currency's strongest level of the session was C$1.3820, while its weakest was C$1.3921.
Canada's new Liberal government is set to unveil its first budget in the week of March 21, two sources with knowledge of the process said on Tuesday. The Liberals have pledged major new spending aimed at boosting a flagging economy.
Canadian government bond prices were lower across the maturity curve on Wednesday, with the two-year price down 3.5 Canadian cents to yield 0.37 percent and the benchmark 10-year falling 7 Canadian cents to yield 1.055 percent.
The 10-year yield hit a new record low of 1.008 percent on Tuesday amid a flight to safety.
The yield curve flattened further as the front-end underperformed. The spread between the 2-year and 10-year yields narrowed by 0.9 basis point to 68.5 basis points, its tightest since December 2012.
The Canada-US two-year bond spread was 2.1 basis points more negative at -36.5 basis points, while the 10-year spread was 1.7 basis points more negative at -69.6 basis points as Treasuries underperformed.
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