Canadian dollar pulls back from eight-week high as inflation steady
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The Canadian dollar CADUSD weakened against its U.S. counterpart on Wednesday, pulling back from an eight-week high, as oil prices fell and investors weighed domestic inflation data that could leave the door open to a smaller rate Bank of Canada rate hike.
Canada’s annual inflation rate held steady at 6.9 per cent in October, matching analyst forecasts, while core inflation measures were mixed, Statistics Canada data showed.
Money markets have fully priced in a 25 basis point interest rate hike by the BoC at its next policy decision on Dec. 7 and see a 35 per cent chance of a larger hike of 50 basis points, up from about 30 per cent before the data.
The central bank hiked by 50 basis points last month, lifting its policy rate to a 14-year high of 3.75 per cent.
The price of oil, one of Canada’s major exports, fell as geopolitical tensions following an attack on an oil tanker off the coast of Oman were offset by concerns over rising COVID-19 cases in China.
U.S. crude prices fell 2 per cent to $85.16 a barrel, while the Canadian dollar was trading 0.2 per cent lower at 1.33 to the greenback, or 75.19 U.S. cents.
The currency moved in a range of 1.3229 to 1.3308, after touching on Tuesday its strongest level since Sept. 20 at 1.3225.
Canadian government bond yields were mixed across a more deeply inverted curve. The 2-year rose 2.7 basis points to 3.870 per cent, while the 10-year was down 2.3 basis points at 3.098 per cent.
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