Canadian dollar recovers from three-week low, slips 0.4 percent for week

TORONTO (Reuters) - The Canadian dollar strengthened against its U.S. counterpart on Friday but still declined 0.4 percent for the week as recent comments from the Bank of Canada weighed on the currency and higher U.S. Treasury yields boosted the greenback.

U.S. and Canada Dollar notes are seen in this June 22, 2017 illustration photo. REUTERS/Thomas White/Illustration

At 4 p.m. EDT (2000 GMT), the Canadian dollar was trading 0.3 percent higher at C$1.2831 to the greenback, or 77.94 U.S. cents. It touched its weakest since April 3 at C$1.2900.

“We had over the last few days some dovish statements coming out of the Bank of Canada,” said Hosen Marjaee, senior managing director, Canadian fixed income at Manulife Asset Management.

“They became a bit more concerned about the strength of the Canadian economy, so that took away some expected rate hikes out of the curve and that pushed the Canadian dollar weaker.”

The loonie has declined more than two percent since the Bank of Canada 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 central bank has worried about uncertainties that could hurt the economy, including a shift toward protectionist global trade policies.

Negotiators trying to hammer out a quick deal to revamp the North American Free Trade Agreement said they will take a break until May 7, allowing time for consultations with the auto industry in Mexico and for U.S. Trade Representative Robert Lighthizer to visit China.

Speculators have trimmed bearish bets on the Canadian dollar for the third straight week, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed. As of April 24, net short positions had fallen to 25,144 contracts from 30,324 a week earlier.

U.S. crude oil futures settled 0.1 percent lower at $68.10 a barrel. Oil is one of Canada’s major exports.

The U.S. dollar held steady despite a government report showing slower U.S. first-quarter economic growth, with the currency on track to end its strongest week since November 2016.

Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries as investors worried about the strength of the global economy.

The two-year rose 3.5 Canadian cents to yield 1.896 percent and the 10-year climbed 27 Canadian cents to yield 2.321 percent.

Reporting by Fergal Smith; editing by Jonathan Oatis and James Dalgleish