The Canadian dollar weakened to a more than one-week low against its U.S. counterpart on Thursday, extending its decline after a Bank of Canada interest rate decision the previous day, as oil prices fell and the greenback climbed.
At 4 p.m. EDT (2000 GMT), the Canadian dollar was trading 0.3 percent lower at $1.2662 to the greenback, or 78.98 U.S. cents. The currency touched its weakest level since April 10 at $1.2676.
The loonie was due a pullback after it had appreciated too much on higher oil prices and hopes of a deal to revamp the North American Free Trade Agreement, said Fred Demers, chief Canada macro strategist at TD Securities.
The loonie had appreciated as much as 4.8 percent since March. On Tuesday, it notched an eight-week high at $1.2528.
“The big story for me is the Bank of Canada will be lagging the Fed in this tightening cycle,” Demers said.
The central bank left its benchmark interest rate on hold at 1.25 percent on Wednesday and said it did not know when or how aggressive it would need to be to keep inflation in check.
Chances of a hike at the next rate decision in May have fallen to 30 percent from about 40 percent before the announcement, the overnight index swaps market indicated.
The U.S. dollar gained against a basket of major currencies on higher U.S. bond yields and expectations of more rate increases from the Federal Reserve.
The price of oil, one of Canada’s major exports, hit highs not seen since 2014, but later gave back gains following a swift rally over the last week.
U.S. crude oil futures settled 0.3 percent lower at $68.29 a barrel.
Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries, as investors worried that recent strength in commodity prices would stoke higher inflation.
The two-year fell 3 Canadian cents to yield 1.908 percent and the 10-year declined 27 Canadian cents to yield 2.323 percent.
The 2-year yield touched its highest since June 2011 at 1.926 percent.
Canada added 42,800 jobs in March, led by hiring in the construction industry, according to a report from ADP.
Canadian inflation data for March and the February retail sales report are due on Friday.