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The Canadian dollar weakened to its lowest level in more than two months against its U.S. counterpart on Thursday, as commodity prices fell and the growing spread of the COVID-19 Delta variant weighed on investor sentiment.

Global stock markets fell, pressured by a widening crackdown on the tech sector in China and the potential for the variant to hinder global economic recovery.

Canada is a major producer of commodities, including oil and copper, so the loonie tends to be sensitive to prospects for the global economy.

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Copper prices fell after the U.S. Federal Reserve confirmed plans to tighten monetary policy sooner than expected, while U.S. crude prices were down 0.2 per cent at $72.09 a barrel as the collapse of talks among leading producers raised the possibility of the current output agreement being abandoned.

The Canadian dollar was trading 0.7 per cent lower at 1.2561 to the greenback, or 79.61 U.S. cents, adding to a string of declines since the start of the week. It touched its weakest intraday level since April 21 at 1.2590.

The Canadian jobs report for June, which could offer clues on the Bank of Canada policy outlook, is due on Friday. Some analysts expect the BoC to cut bond purchases again at next week’s interest rate announcement.

Canadian government bond yields were lower across a flatter curve, tracking the move in U.S. Treasuries. The 10-year touched its lowest level since Feb. 24 at 1.239 per cent before recovering slightly to 1.246 per cent, down 5 basis points on the day.

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