The Canadian dollar CADUSD -0.52%decrease weakened against its U.S. counterpart on Tuesday as investors dialed back bets on additional interest rate hikes by the Bank of Canada following softer-than-expected domestic inflation data.
Canada’s annual inflation rate eased to an annual rate of 5.9 per cent in January from 6.3 per cent in December, Statistics Canada data showed. Analysts had expected inflation to slow to 6.1 per cent.
Money markets now see a roughly 80 per cent chance that the BoC will raise interest rates again this year after having fully discounted such a move before the data.
Last month, the central bank signaled a pause in its tightening campaign after raising its benchmark rate to a 15-year high of 4.50 per cent.
The Canadian dollar was trading 0.4 per cent lower at 1.35 to the greenback, or 74.07 U.S. cents, after moving in a range of 1.3442 to 1.3507. On Friday, the currency touched a six-week intraday low at 1.3537.
The loonie fell as equity markets globally slumped and the U.S. dollar gained ground against a basket of major currencies.
The price of oil, one of Canada’s major exports, was up 0.8 per cent at $76.97 a barrel.
Canadian government bond yields were higher across the curve, tracking the move in U.S. Treasuries and German Bunds following stronger-than-expected business activity data in the euro zone.
The 10-year touched its highest level since Nov. 10 at 3.400 per cent before dipping to 3.374 per cent, up 8 basis points on the day.
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