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The Canadian dollar weakened to its lowest level in nearly eight weeks against the greenback on Friday and posted its biggest weekly decline since March last year, as the Federal Reserve’s more hawkish stance led to short-covering of U.S. dollars.

The loonie was trading 0.5% lower at 1.2422 to the greenback, or 80.50 U.S. cents, after earlier touching its weakest level since April 26 at 1.2480. For the week, it was down 2%, after ending lower in the three previous weeks.

“We have seen some pretty material short-dollar positions in the market and we have seen traders rushing in to cover those shorts,” said Andrew Cherry, head of global markets, HSBC Bank Canada.

“The Fed surprised the market on Wednesday, sending some pretty big shock waves through currency and rate markets,” Cherry added.

On Wednesday, the U.S. central bank signalled interest rate hikes could begin in 2023, sooner than previous guidance of 2024.

Canada is a major producer of commodities, including copper and oil, which have benefited from Fed stimulus.

Copper was down more than 8% for the week, but oil notched a fourth week of gains after OPEC sources said the producer group expected limited U.S. oil output growth this year.

Canada is extending a ban on non-essential travel with the United States and the rest of the world until July 21, officials said, prompting frustration from businesses and U.S. legislators.

Domestic data showed new home prices rising in May at an annual rate of 11.3%, the largest increase since November 2006.

Canadian government bond yields were mixed across a flatter curve, with the 10-year falling 1.4 basis points to 1.380%.

The gap between 2- and 10-year rates narrowed by 7.4 basis points to 92.7 basis points in favour of the longer-dated bond, the smallest spread since Feb. 18.

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