TORONTO: The Canadian dollar strengthened against its US counterpart on Wednesday, recovering from a two-month low it hit the previous day after stronger-than-expected domestic inflation data, but earlier gains were capped as the greenback rallied broadly.
The US dollar gained against a basket of currencies after minutes from the Federal Reserve's July meeting showed that policymakers were united in wanting to avoid the appearance of being on the path to further rate cuts.
Canada's annual inflation rate held steady in July at 2% as lower costs for services were offset by higher prices for durable goods. Analysts had expected the annual rate to fall to 1.7% from 2% in June.
"The Canadian dollar and other major currencies are selling off in response to a lowering of odds of further monetary easing from the Federal Reserve," said Karl Schamotta, director of global markets strategy at Cambridge Global Payments. But "the inflation data this morning is underpinning the rally that we've seen."
The Canadian dollar was trading 0.2% higher at 1.3289 to the greenback, or 75.25 US cents, at 3:12 p.m. (1912 GMT). The currency, which on Tuesday touched its weakest intraday level since June 19, was trading in a range of 1.3254 to 1.3324.
Oil futures gave up earlier gains as increases in refined product inventories and lingering worries about the global economy offset US government data showing a drawdown in domestic crude stocks.
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