C$ weakens as oil prices retreat
By Fergal Smith
TORONTO (Reuters) - The Canadian dollar weakened slightly against its U.S. counterpart on Thursday as oil prices fell, although some losses were pared after tamer-than-expected U.S. inflation data.
Oil markets closed lower on a mixed report from the International Energy Agency and skepticism that an upcoming meeting of major producers would do much to tighten the supply demand balance.
"The correlation between the Canadian dollar and oil is currently pretty high," said Hendrix Vachon, senior economist at Desjardins.
U.S. crude CLc1 prices settled at $41.50 a barrel, down 0.62 percent.
U.S. consumer prices rose less than expected in March and underlying inflation slowed, suggesting the Federal Reserve will remain cautious about raising interest rates this year.
However, the prospects of U.S. interest rate hikes were already low, said Vachon, so the data was "not a game changer."
The loonie hit a nearly nine-month high at C$1.2744 on Wednesday but closed lower on the day after the Bank of Canada counseled caution on the outlook for economic growth.
The central bank warned that the country's improving economy faced downside risks, including a stronger currency that could drag on non-commodity exports, although it held interest rates steady and raised growth forecasts. Continued...