The Canadian dollar CADUSD weakened to a near two-week low against its U.S. counterpart on Tuesday as U.S. bond yields climbed ahead of key economic data this week and despite higher oil prices.
The loonie was trading 0.2 per cent lower at 1.3530 to the U.S. dollar, or 73.91 U.S. cents, after touching its weakest intraday level since Feb. 15 at 1.3539.
“U.S. yields keep chugging higher and that’s dragging the broader USD higher. So I think CAD is just getting dragged down with all that,” said Erik Bregar, director, FX & precious metals risk management.
The U.S. 10-year yield rose 2 basis points to 4.319 per cent, moving toward the top of its recent range, ahead of Thursday’s release of the U.S. personal consumption expenditures price index for January which could offer clues on prospects for Federal Reserve interest rate cuts.
“It’s the Fed’s favourite inflation gauge. If that comes in hot, I wouldn’t be surprised to see yields extend higher … and CAD suffers again.”
Canada is also due to release key economic data on Thursday. Analysts expect an annualized increase of 0.8 per cent for gross domestic product in the fourth quarter.
The price of oil, one of Canada’s major exports, settled 1.7 per cent higher at $78.87 a barrel as sources said producer group OPEC+ is considering extending voluntary oil output cuts into the second quarter.
Canadian government bond yields moved higher across a steeper curve, with the 10-year up 7.1 basis points at 3.568 per cent.