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The Canadian dollar weakened to a 1-1/2-year low against the greenback on Wednesday, pressured by softer-than-expected domestic inflation data and further declines on Wall Street as the Federal Reserve again raised interest rates.

At 3:53 p.m. (2053 GMT), the Canadian dollar was trading 0.1 per cent lower at 1.3488 to the greenback, or 74.14 U.S. cents. The currency touched its weakest level since June 2017, at 1.3507.

“There really isn’t a strong catalyst for reversal here, basically in a situation where equities continue to fall under pressure,” said Mazen Issa, senior FX strategist at TD Securities. “CAD retains a bit of sensitivity to the overall equity dynamic.”

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Stocks fell after the Fed delivered its fourth hike of 2018, as expected. Though the central bank forecast fewer rate hikes next year in the face of financial market volatility and slowing global growth, it fell short of investors’ hopes of a more dovish monetary policy.

Canada exports many commodities, including oil, and runs a current account deficit, so its economy could be hurt if the global flow of trade or capital slows.

Lower gas prices pulled Canada’s annual inflation rate in November down to 1.7 per cent, the first time in 10 months it has been below the Bank of Canada’s 2.0 per cent target, Statistics Canada data indicated. Analysts had forecast the rate would fall to 1.8 per cent from 2.4 per cent in October.

The slowdown in inflation indicates that the Bank of Canada can be “less hurried to raise rates,” Issa said.

Chances of a Bank of Canada interest rate hike in March dropped to 13 per cent from 17 per cent before the data, the overnight index swaps market showed. Bets on further tightening had already been slashed after a dovish policy announcement earlier this month from the central bank.

The loonie lost ground on Wednesday even as the price of oil recovered somewhat from a sharp selloff during the previous session. U.S. crude oil futures settled 2.1 per cent higher at $47.20 a barrel.

Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The two-year

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rose 5 Canadian cents to yield 1.895 per cent and the 10-year climbed 38 Canadian cents to yield 1.971 per cent.

The 10-year yield touched its lowest level since Dec. 20, 2017, at 1.949 per cent.

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