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The Canadian dollar edged lower against its U.S. counterpart on Tuesday as investors weighed prospects of central banks delaying a move to interest rate cuts following heated U.S. inflation data.

The loonie was trading 0.1 per cent lower at 1.3495 to the U.S. dollar, or 74.10 U.S. cents, after touching its weakest intraday level since Thursday at 1.3525.

“The U.S. dollar is broadly higher on a hotter inflation report and that’s the whole story in the currency market today,” said Adam Button, chief currency analyst at ForexLive.

U.S. consumer prices increased solidly in February amid higher costs for gasoline and shelter, suggesting some stickiness in inflation that could delay an anticipated June interest rate cut from the Federal Reserve.

The Bank of Canada may not want to diverge too much from the Fed if it leads to a weaker Canadian dollar and higher import costs, say analysts.

“If central bankers stay sidelined then economic risks begin to build for 2025 around global growth and Canadian growth,” Button said.

Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to the global economic outlook. U.S. crude oil futures fell for a fourth straight day, settling 0.5 per cent lower at $77.56 a barrel.

The Bank of Canada last Wednesday said it was too early to consider easing rates as it kept its benchmark rate on hold at a 22-year high of 5 per cent.

Canadian government bond yields moved higher across the curve, tracking moves in U.S. Treasuries. The 10-year was up 3.7 basis points at 3.394 per cent.

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