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The Canadian dollar CADUSD strengthened against its U.S. counterpart on Wednesday, rebounding from an 18-month low the day before, as oil prices rallied and investors weighed signs of a peak in U.S. inflation.

Wall Street rallied and the U.S. dollar fell against a basket of major currencies as data showed U.S. consumer price growth slowed in April as gasoline prices eased off record highs. Still, inflation is likely to stay hot for a while and keep the Federal Reserve’s foot on the brakes to cool demand.

The price of oil, one of Canada’s major exports, rebounded after plunging nearly 10 per cent in the past two sessions, buoyed by supply concerns as flows of Russian gas to Europe fell and the European Union worked on gaining support for a Russian oil embargo.

U.S. crude prices climbed 5.4 per cent to $105.15 a barrel, while the Canadian dollar was up 0.7 per cent higher at 1.2930 to the greenback, or 77.34 U.S. cents.

The currency traded in a range of 1.2923 to 1.3039, after touching on Tuesday its weakest level since November 2020 at 1.3052.

Bank of Canada Deputy Governor Toni Gravelle is due to speak on Thursday on commodities, growth and inflation, which could offer clues on the outlook for interest rates. Money markets expect the central bank to hike by half a percentage point for a second straight policy meeting on June 1.

Canadian government bond yields were higher across the curve, tracking the move in U.S. Treasuries. The 10-year rose 5.6 basis points to 3.066 per cent but holding below Monday’s 11-year peak of 3.173 per cent.

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