The Canadian dollar weakened to a near six-week low against the greenback on Wednesday as investor sentiment soured on U.S.-China tensions, but the loonie clawed back some losses after domestic inflation data that was in line with expectations.
At 9:19 a.m., the Canadian dollar was trading 0.1 per cent lower at 1.3285 to the greenback, or 75.27 U.S. cents. The currency touched its weakest intraday level since Oct. 10 at 1.3315.
Canada’s annual inflation rate held steady in October at 1.9 per cent as expected, data from Statistics Canada showed, marking the third straight month of little change.
“The external climate is of more concern (than inflation) for the loonie at the moment and Bank of Canada officials are doing a fantastic job of talking it (the currency) down,” said Simon Harvey, FX market analyst for Monex Europe and Monex Canada.
On Tuesday, Bank of Canada Senior Deputy Governor Carolyn Wilkins said the global economy is facing immense challenges that could spill over into Canada.
Bank of Canada Governor Stephen Poloz is due to speak on Thursday on economic change.
World stocks were knocked off 22-month highs after the United States Senate unanimously passed legislation on Tuesday aimed at protecting human rights in Hong Kong amid a crackdown on a pro-democracy protest movement, drawing condemnation from Beijing.
The tensions could make it more difficult for the United States and China to reach a trade deal. Canada is a major exporter of commodities, including oil, so its economy could be hurt by prolonged trade uncertainty.
Oil edged higher on Wednesday as Iran-related tensions escalated but receding hopes for a quick solution to the U.S.-China trade war dragged on prices. U.S. crude oil futures were up 1 per cent at $55.76 a barrel.
Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The two-year rose 1 cent to yield 1.512 per cent and the 10-year was up 23 cents to yield 1.420 per cent.
The 10-year yield touched its lowest intraday level since Oct. 10 at 1.394 per cent
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