TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Thursday to approach the previous day’s three-week low, weighed by a cautious Bank of Canada and as investors assessed the progress of talks to seal a NAFTA trade deal.
At 4 p.m. (2000 GMT), the Canadian dollar CAD=D4 was trading 0.2 percent lower at C$1.2883 to the greenback, or 77.62 U.S. cents.
The currency traded in a range of C$1.2823 to C$1.2885. On Wednesday, the loonie touched its weakest point in more than three weeks at C$1.2897.
High-level talks to update the North American Free Trade Agreement are going slowly, Mexican Economy Minister Ildefonso Guajardo said, adding the process was “not easy.”
“My general view is that Canada (dollar) is going to be less responsive than Mexico (peso) to any NAFTA news,” said Alvise Marino, FX strategist at Credit Suisse in New York.
The Bank of Canada’s tendency to highlight headwinds for the economy is the factor most pressuring the loonie, Marino said.
The Canadian dollar has declined 2.6 percent since the central bank last week held its benchmark interest rate steady at 1.25 percent and said it did not know when or how aggressive it would need to be to keep inflation in check.
The U.S. dollar .DXY was boosted by a weaker euro, after ECB President Mario Draghi hailed "solid" euro zone growth but kept rates unchanged.
The price of oil, one of Canada’s major exports, was supported by the risk of renewed U.S. sanctions on Iran, plunging Venezuelan output and robust global demand.
U.S. crude oil futures CLc1 settled 0.2 percent higher at $68.19 a barrel.
Canadian average weekly earnings of non-farm payroll employees rose 3.4 percent in February compared with the same month last year, led by the accommodation and food services sectors, Statistics Canada said.
Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries as buyers emerged following a week-long selloff spurred by concerns about rising inflation and growing borrowing by the U.S. government.
Still, the 10-year yield touched its highest intraday level since Feb. 15 at 2.379 percent.
Reporting by Fergal Smith; Editing by Peter Cooney
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