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Market News Canadian dollar retreats from two-week high as oil prices tumble

The Canadian dollar weakened against its U.S. counterpart on Wednesday, pulling back from an earlier two-week high as oil prices fell and the greenback halted this week’s decline.

At 4:13 p.m. EDT (2013 GMT), the Canadian dollar was trading 0.2 per cent lower at 1.3419 to the greenback, or 74.52 U.S. cents. The currency touched its strongest intraday level since May 22 at 1.3363.

The turn lower for the loonie was due to a rebound in the U.S. dollar after data showed U.S. services sector activity picked up in May and due to lower oil prices, said Daniel Katzive, head of FX strategy North America at BNP Paribas in New York.

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The U.S. dollar, which has been pressured this week by speculation that the Federal Reserve would cut interest rates, gained ground against a basket of major currencies.

The price of oil, one of Canada’s major exports, fell to its lowest since January after U.S. crude inventories unexpectedly surged, adding to concerns about slowing global growth. U.S. crude oil futures settled 3.4 per cent lower at $51.68 a barrel.

Canadian labour productivity grew by 0.3 per cent in the first quarter, reflecting a decline in hours worked for the first time in seven consecutive quarters, while business output remained virtually unchanged, Statistics Canada said.

Economists worry that weak productivity growth in Canada could hold back growth in its trade-dependent economy.

White House trade adviser Peter Navarro said U.S. tariffs on Mexican goods may not have to take effect because Washington now has Mexico’s attention on the issue.

The tariffs could undermine chances of a new North American trade deal coming into force. Canada sends about 75 per cent of its exports to the United States.

Canadian government bond prices were higher across the yield curve, with the two-year up 10 Canadian cents to yield 1.338 per cent and the 10-year rising 32 Canadian cents to yield 1.443 per cent.

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The 10-year yield touched its lowest intraday since June 2017 at 1.410 per cent.

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