Canadian dollar hits 2-week low as greenback broadly rallies

TORONTO: The Canadian dollar weakened against its US counterpart on Friday, extending a weekly decline, as the greenback broadly rose and domestic data showed industries operating at a greater share of their capacity in the first quarter.

The loonie was trading 0.3% lower at 1.2135 to the greenback, or 82.41 US cents, after touching its weakest intraday level since May 27 at 1.2140. For the week, it was on track to fall 0.5%.

The US dollar rallied against a basket of major currencies as US Treasury yields stabilized. Yields fell on Thursday as the market deemed a spike in inflation to be transitory.

Canadian industries ran at 81.7% of capacity in the first quarter of 2021, up from an upwardly revised 79.7% in the fourth quarter of 2020, Statistics Canada said.

"The report tracks the impact of the boom in the housing and resource extraction industries as the economy reflates," said Ryan Brecht, a senior economist at Action Economics.

On Wednesday, the Bank of Canada said there remains considerable excess capacity in the Canadian economy.

Still, the BoC's more hawkish stance since April and soaring commodity prices have helped boost the Canadian dollar, with the currency up nearly 5% against the US dollar since the start of the year.

A stronger loonie is usually seen hurting exporters, but the nature of the global economic recovery could help companies pass on their higher costs from the currency to customers, leaving exporters in less pain than in previous cycles.

Oil, one of Canada's major exports, rose on Friday to a fresh multi-year high at $70.80 a barrel.

Canadian government bond yields were mixed across the curve, with the 10-year up 1.2 basis points at 1.383%.

Earlier in the day, it touched its lowest since March 3 at 1.368%.