The Canadian dollar CADUSD weakened against its U.S. counterpart on Friday, giving back much of its weekly gain, as investors grew more confident that the Bank of Canada will raise interest rates less than some other major central banks from this point.
The Canadian dollar was trading 0.8 per cent lower at 1.3210 to the greenback, or 75.70 U.S. cents, pulling back from an earlier 10-month high at 1.3093. For the week, the currency was on track to gain 0.5 per cent.
The loonie is at a “bit of a disadvantage” in the current environment of broad-based U.S. dollar weakness, said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC.
“It’s primarily because the Bank of Canada is seen done (with hikes) … Other central banks will be raising rates much more aggressively.”
On Wednesday, the BoC raised its benchmark interest rate by a quarter of a percentage point to a 22-year high of 5.0 per cent, while it dropped a line in its statement saying rates were not restrictive enough.
The price of oil, one of Canada’s major exports, fell as the U.S. dollar clawed back some recent declines and oil traders booked profits from a strong rally in recent weeks. U.S. crude oil futures settled 1.9 per cent lower at $75.42 a barrel.
Canadian home sales rose in June at a slower pace than in recent months as the BoC restarted its interest rate hiking campaign. Sales were up 1.5 per cent from May, a smaller increase than was posted in April and May, from the Canadian Real Estate Association showed.
Canadian government bond yields were higher across the curve, unwinding some of this week’s move. The 2-year rose 5.7 basis points to 4.637, while the 10-year was up 1.6 basis points at 3.365 per cent.