TORONTO: The Canadian dollar weakened against its broadly stronger US counterpart on Monday as oil dipped and investors braced for a potential increase in US interest rates this summer.
The greenback strengthened against a basket of major currencies after Federal Reserve Chair Janet Yellen said on Friday that a rate increase in the coming months "would be appropriate," if the economy and labor market continued to improve.
Oil prices dipped as Iraq raised its crude exports target ahead of an OPEC meeting while Canadian production was set to restart after huge wildfires. US crude prices were down 0.20 percent to $49.23 a barrel.
Suncor Energy Inc's facilities north of Fort McMurray, Alberta, are expected to partially restart by the end of the week, the company said on Sunday, the latest sign Canadian oil sands producers are coming back online after a massive wildfire.
Last week, the Bank of Canada kept interest rates on hold at 0.50 percent, saying the economy would shrink in the second quarter as a result of damage from recent wildfires in Alberta before rebounding later in the year.
At 9:46 a.m. EDT (1346 GMT), the Canadian dollar was trading at C$1.3069 to the greenback, or 76.52 US cents, weaker than Friday's close of C$1.3038, or 76.70 US cents.
The currency's strongest level of the session was C$1.3025, while its weakest was C$1.3095.
The loonie touched last week a seven-week low of C$1.3188.
Speculators only modestly reduced bullish bets on the Canadian dollar despite recent wildfires in Alberta and hawkish comments from Fed officials, Commodity Futures Trading Commission data showed. Net long Canadian dollar positions fell to 20,047 contracts in the week ended May 24 from 22,706 contracts in the prior week.
Statistics Canada released domestic data which had little market impact.
Canada's current account deficit widened to C$16.77 billion ($12.90 billion) in the first quarter from C$15.71 billion in the previous quarter, while producer prices fell by 0.5 percent in April.
Canadian government bond prices were lower across the maturity curve, with the two-year price down 2 Canadian cents to yield 0.66 percent and the benchmark 10-year falling 9 Canadian cents to yield 1.368 percent.
US markets are closed for Memorial Day, while markets in London are shut for a public holiday.
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