Canadian dollar touches 10-day low; decline capped as oil prices rise

The Canadian dollar CADUSD weakened to a 10-day low against its broadly stronger US counterpart on Thursday as investors continued to assess minutes from the Federal Reserve’s latest policy meeting, but the decline was limited as oil prices moved higher.

The loonie was down 0.1% at 1.2920 to the greenback, or 77.40 US cents, after touching its weakest since Aug. 8 at 1.2946.

The US dollar touched a three-week high against a basket of major currencies after minutes from the Fed’s July meeting pointed to US interest rates staying higher for longer to bring down inflation.

The price of oil, one of Canada’s major exports, rose as robust US fuel consumption data and expected falls in Russian supply later in the year offset concerns that a possible recession in developed economies could undercut demand.

US crude prices were up 2.2% at $90.04 a barrel.

Producer prices in Canada fell by 2.1% in July from June but were up 11.9% on an annual basis, data from Statistics Canada showed.

Canadian inflation is not likely to return to the central bank’s 2% target until 2024 after possibly peaking in June, as less volatile items like wages and rent displace energy as key sources of price pressure, analysts say.

Canadian retail sales data for June, due on Friday, could offer more clues on the outlook for the domestic economy.

Canadian government bond yields eased across a flatter curve. The 10-year was down 5.4 basis points at 2.806%, after touching on Wednesday its highest intraday rate in more than three weeks at 2.890%.

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