The Canadian dollar CADUSD on Wednesday weakened to a near seven-week low against its U.S. counterpart as the recent rise in global borrowing costs made the currency less attractive to investors.
The loonie was trading nearly 0.2% lower at 1.3561 to the greenback, or 73.74 U.S. cents, after touching its weakest level since Jan. 6 at 1.3568.
“The primary force is the rise in U.S. rates that is effectively tightening global financial conditions,” said Karl Schamotta, chief market strategist at Corpay.
“That is making it hesitant for investors to buy the Canadian dollar on the basis that it (Canada) is an interest rate sensitive economy and could suffer further weakness if rates remains as high as they are today.”
Bond yields have moved sharply higher in recent weeks as investors bet that the Federal Reserve would raise interest rates to a higher endpoint than previously thought.
The U.S. dollar rose against a basket of major currencies after the publication of minutes from the Fed’s latest policy meeting which showed solid backing for further tightening.
Canadian new home prices fell 0.2% in January from December, while the annual rate of increase slowed to 2.7%, adding to evidence of a slowdown in Canada’s once red-hot housing market.
It follows data on Tuesday showing that Canada’s annual inflation rate eased more than expected in January to 5.9%.
The price of oil, one of Canada’s major exports, settled 3.2% lower at $73.95 per barrel as the prospect of higher U.S. interest rates stoked concerns about fuel demand.
The Canadian 10-year eased 6.4 basis points to 3.377% after touching on Tuesday its highest intraday level in more than three months at 3.447%.