TORONTO (Reuters) - The Canadian dollar edged lower on Wednesday against the greenback as oil prices eased off one-month highs, while minutes from the Federal Reserve’s latest meeting supported the view that Canadian and U.S. monetary policy will diverge.
Most Fed policymakers think the U.S. central bank should take steps to begin trimming its $4.5 trillion balance sheet later this year as long as economic data holds up, the minutes showed.
Earlier in the day, data showing U.S. private-sector employers created more jobs than expected in March supported expectations of at least two more interest rate hikes from the Fed this year.
“There is an expectation that interest rate differentials are going to continue to diverge, which is putting the Canadian dollar under pressure,” said Scott Lampard, head of global markets at HSBC Bank Canada.
U.S. crude CLc1 prices settled 12 cents higher at $51.15 a barrel, but had pared some gains as support from an outage at the largest UK North Sea oilfield was offset by a surprise increase in U.S. crude inventories to a record high. [O/R]
Oil is one of Canada’s major exports.
The Canadian dollar CAD=D4 ended at C$1.3427 to the greenback, or 74.78 U.S. cents, weaker than Tuesday’s close of C$1.3406, or 74.59 U.S. cents.
The currency traded in a range of C$1.3379 to C$1.3435.
On Tuesday, the loonie hit a nearly three-week low at C$1.3455, pressured by a loss of risk appetite and domestic data showing an unexpected trade deficit.
Toronto home sales and prices surged in March, an industry report showed, fueling fears of a real estate bubble in Canada’s largest city.
The risk of triggering “a problem in the Canadian housing market” may cause the Bank of Canada to tread softly on interest rate increases, Lampard said.
The central bank’s next rate decision and monetary policy report are due on April 12.
Canadian government bond prices were higher across the yield curve, with the two-year CA2YT=RR up 2.5 Canadian cents to yield 0.724 percent and the 10-year CA10YT=RR rising 21 Canadian cents to yield 1.558 percent.
On Tuesday, the 10-year yield touched its lowest in four months at 1.545 percent.
Canada’s employment report for March is due on Friday. Economists forecast that Canada added just 5,000 jobs after a strong run of employment gains. ECONCA
Reporting by Fergal Smith; Editing by Meredith Mazzilli