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TORONTO (Reuters) - The Canadian dollar weakened slightly against its U.S. counterpart on Wednesday, but losses were pared as oil prices turned higher, and the currency held near a 12-week high seen on Tuesday.
Oil prices CLc1 LCOc1 firmed as buyers banked on production limit plans to counter record high U.S. crude stockpiles, keeping alive hopes the market had bottomed from the selloff that began nearly two years ago. [O/R]
Commodity currencies have benefited in the last few days from the bounce in commodity prices as well as "data surprises," said Daniel Katzive, head of FX strategy North America at BNP Paribas.
Australia's economy grew in the fourth quarter at the fastest pace in almost two years, while Canada's gross domestic product data on Tuesday reduced pressure on the Bank of Canada to cut rates.
The implied probability of a rate cut this year has fallen to less than 40 percent from around 80 percent last week when Finance Minister Bill Morneau said the government will stick to plans in the March 22 federal budget to stimulate the economy. BOCWATCH
The market may be "more willing to price in the chance of a rate cut" once the budget is out of the way, said Katzive.
The Canadian dollar CAD=D4 closed at C$1.3427 to the greenback, or 74.48 U.S. cents, slightly weaker than Tuesday's official close of C$1.3414, or 74.55 U.S. cents.
The currency's strongest level of the session was C$1.3406, while its weakest was C$1.3499. On Tuesday, it touched its strongest since Dec. 7 at C$1.3387.
Data released south of the border on Wednesday showed U.S. private employers added more jobs than expected in February. But the Federal Reserve said in its Beige Book that economic conditions are mixed.
Canadian government bond prices were lower across the maturity curve, with the two-year CA2YT=RR price down 1 Canadian cent to yield 0.537 percent and the benchmark 10-year CA10YT=RR falling 14 Canadian cents to yield 1.251 percent.
The curve steepened further as longer-dated maturities underperformed. The spread between the 2-year and 10-year yields widened by 1 basis point to 71.4 basis points, its widest since Feb. 8.
Canadian trade data for January is awaited on Friday. ECONCA
Reporting by Fergal Smith; Editing by W Simon and James Dalgleish