September 5, 2019 / 2:18 PM / 9 days ago

Canadian dollar reverses from three-week high as economic data boosts greenback

TORONTO (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Thursday, pulling back from a three-week high reached after the Bank of Canada’s interest rate decision, as encouraging U.S. data boosted the greenback.

FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

The U.S. dollar .DXY pared its decline against a basket of major currencies after data showed that U.S. services sector activity accelerated in August and private employers boosted hiring.

“We had strong U.S. data, which helped the dollar against a lot of things and the CAD had been a popular anti-dollar trade,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.

Selling of the currency against sterling on the likelihood that Brexit does not take place at the end of October added to pressure on the Canadian dollar, Anderson said.

At 3:45 p.m. (1945 GMT), the Canadian dollar CAD=D4 was trading 0.1% lower at 1.3230 to the greenback, or 75.59 U.S. cents. The currency’s weakest level was 1.3246, while it touched its strongest since Aug. 13 at 1.3192.

Stocks and the price of oil, one of Canada’s major exports, were supported by hopes of progress in resolving the U.S.-China trade feud. U.S. crude oil futures CLc1 settled 4 cents higher at $56.30 a barrel.

The Canadian economy is showing “a welcome degree of resilience” to negative shocks, said Bank of Canada Deputy Governor Lawrence Schembri, one day after the central bank left its benchmark interest rate on hold at 1.75%.

Chances of a cut at the next central bank meeting on interest rates on Oct. 30 have tumbled to about 40% from nearly 70% before Wednesday’s policy announcement.

Expectations could move again on Friday, when Canada’s employment report for August is due.

Canadian government bond prices were lower across the yield curve, in sympathy with U.S. Treasuries. The two-year CA2YT=RR fell 21 Canadian cents to yield 1.451% and the 10-year CA10YT=RR was down 125 Canadian cents to yield 1.264%.

The 10-year yield touched its highest intraday level since Aug. 23 at 1.279%.

(The story is refiled to add bank name in third paragraph.)

Reporting by Fergal Smith; Editing by Steve Orlofsky

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