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The Canadian dollar CADUSD weakened to a one-week low against its U.S. counterpart on Wednesday as U.S. bond yields rose and domestic data showed housing starts falling more than expected in March.

The loonie was trading 0.6% lower at 1.3462 to the greenback, or 74.28 U.S. cents, its weakest level since last Wednesday.

The decline for the currency came as oil settled 2.1% lower at $79.16 a barrel, while investors turned more skeptical that the Federal Reserve will cut interest rates later this year, boosting the U.S. dollar against a basket of major currencies.

“The USD came back today after a slight pause yesterday with the help of stronger bond yields,” said Tony Valente, senior FX dealer at AscendantFX.

“This weighed on the CAD as the morning secession started and was helped along with the worse-than-expected Canadian housing starts for March.”

Canadian housing starts fell 11% in March, contributing to a slower trend in recent months that follows a rapid increase in borrowing costs.

Separate data showed that Canadian producer prices rose by 0.1% in March from February but were down 1.8% on an annual basis.

Still, the Canadian dollar is up 3% since hitting a five-month low on March 10.

“All I’m seeing right now is a much-warranted correction,” Valente said. “I suspect this correction will last right into the FOMC’s next meeting.”

The Fed’s Federal Open Market Committee is due to announce its next interest rate decision on May 3.

Canadian government bond yields were higher across the curve, tracking moves in U.S. Treasuries.

The 2-year rose 1.3 basis points to 3.891%, while falling 5.7 basis points further below its U.S. counterpart to a gap of about 38 basis points.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 3:45pm EDT.

SymbolName% changeLast
CADUSD-FX
Canadian Dollar/U.S. Dollar
+0.18%0.7384

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