TORONTO: The Canadian dollar's nearly two-week winning streak against its US counterpart ended on Wednesday, but losses for the currency were pared after the release of minutes from the Federal Reserve's July meeting and as oil turned higher.
The US dollar erased early gains and US bond yields fell after the Fed minutes showed general agreement that more data was needed before the next rate increase from the US central bank.
"The price action just tells you that the (bond) market was short going into the Fed minutes," said Richard Gilhooly, head of rates strategy at CIBC Capital Markets.
The Fed is moving closer to raising rates after employment data since its last policy meeting has been strong, Gilhooly added. The July employment report was the second straight month of strong US jobs data.
Oil rose for a fifth straight day, helped by a weaker US dollar and an unexpected drawdown in US crude and gasoline. US crude oil futures settled 21 cents higher at $46.79 a barrel.
The Canadian dollar ended at C$1.2856 to the greenback, or 77.78 US cents, slightly weaker than Tuesday's close of C$1.2853, or 77.80 US cents.
The currency's strongest level of the session was C$1.2831, while its weakest was C$1.2919.
On Tuesday, the loonie touched its strongest since June 24 at C$1.2798 as domestic data showed a rebound in factory sales. The currency last fell on Aug. 5.
Still, weak US business investment has hampered a long-awaited pick-up in growth of Canada's non-energy exports, economists say, while a weaker Canadian dollar has not helped exports as much as expected.
Canadian government bond prices were mixed across the maturity curve, with the two-year price down 1 Canadian cent to yield 0.572 percent and the benchmark 10-year rising 12 Canadian cents to yield 1.052 percent.
The Canada-US two-year bond spread was 2.1 basis points narrower at -15.8 basis points as Treasuries outperformed.
Canadian retail sales for June and inflation data for July are due on Friday.
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