The Canadian dollar CADUSD weakened to its lowest level in more than two months against its U.S. counterpart on Wednesday as the recent jump in long-term borrowing costs weighed on investor sentiment.
The loonie was trading 0.2% lower at 1.3525 to the greenback, or 73.94 U.S. cents, after touching its weakest intraday level since June 1 at 1.3539.
Risk-sensitive currencies, such as the Canadian dollar, “remain on the defensive,” Karl Schamotta, chief market strategist at Corpay, said in a note.
An aversion to risk is becoming more pronounced “as investors grapple with the prospect of higher long-term rates,” Schamotta said.
A combination of sticky inflation and robust economic growth, particularly in the United States, has fanned fears of interest rates staying higher for longer.
Canada is a major produce or commodities, including oil, so the loonie tends to be sensitive to shifts in investor sentiment.
U.S. crude oil futures settled nearly 2% lower at $79.38 a barrel as investors weighed worries about China’s embattled economy against expectations of tighter supply in the United States.
Canadian housing starts slipped by 10% in July compared with the previous month, which had produced the strongest figures in 10 years. Separate domestic data showed that wholesale trade fell by 2.8% in June from May.
Canadian government bond yields edged higher across the curve. The 10-year was up 1.2 basis points at 3.764%, after touching on Tuesday its highest intraday level in nearly 15 years at 3.803%.