Canadian dollar dips as oil prices slide on record U.S. production

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

TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Thursday as oil prices fell, but the currency traded in a narrow range after pulling back from an eight-day high reached during Wednesday’s session.

The price of oil, one of Canada’s major exports, was pressured by record U.S. crude production that led to a surge in inventories. U.S. crude oil futures were down 2.50% at $62.01 a barrel.

At 9:10 a.m. (1310 GMT), the Canadian dollar was trading 0.1% lower at 1.3461 to the greenback, or 74.29 U.S. cents.

The currency, which touched its strongest intraday level in more than one week on Wednesday at 1.3378, traded in a range of 1.3430 to 1.3463 as investors awaited U.S. jobs data on Friday.

On Wednesday, the loonie pulled back from its strongest intraday level in more than one week at 1.3378, as the Federal Reserve tempered expectations for an interest rate cut this year and after domestic data for April showed auto sales dropped 3.5 percent and factory activity contracted for the first time in more than three years.

Still, Bank of Canada Governor Stephen Poloz said interest rates would rise from their current “very low” levels if headwinds affecting the Canadian economy were to dissipate.

China has suspended pork imports from two Canadian companies, according to an interview with Canada’s agricultural minister and a Chinese customs document, marking the latest irritant in a widening diplomatic dispute.

Canadian government bond prices were lower across the yield curve in sympathy with U.S. Treasuries. The two-year fell 4 Canadian cents to yield 1.593% and the 10-year declined 13 Canadian cents to yield 1.716%.

Reporting by Fergal Smith; Editing by Bernadette Baum