Canadian dollar posts a two-week high as rate cut bets weigh on 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

TORONTO (Reuters) - The Canadian dollar strengthened to a two-week high against its U.S. counterpart on Wednesday as rising speculation that the Federal Reserve would cut interest rates pressured the greenback.

The U.S. dollar fell against a basket of major currencies after Federal Reserve Chairman Jerome Powell on Tuesday dropped his standard reference to the bank being “patient” in approaching a rate decision, saying instead it would respond as “as appropriate” to trade pressure.

At 10:03 a.m. (1403 GMT), the Canadian dollar was trading 0.1% higher at 1.3380 to the greenback, or 74.74 U.S. cents. The currency touched its strongest level since May 22 at 1.3363.

Canadian labor productivity grew by 0.3% in the first quarter, reflecting a decline in hours worked for the first time in seven consecutive quarters, while business output remained virtually unchanged, Statistics Canada said.

Economists worry that weak productivity growth in Canada could hold back growth in its trade-dependent economy.

The price of oil, one of Canada’s major exports, resumed its slide on Wednesday after an unexpected gain in U.S. inventories. U.S. crude prices were down 1.5% to $52.68 a barrel,

China plans to boost inspections of imported Canadian meats and meat products as bilateral trade relations deteriorate, Canadian government officials said on Tuesday, a move meat industry executives said could have “a disastrous effect” on their business.

Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries. The two-year rose 11 Canadian cents to yield 1.333% and the 10-year was up 49 Canadian cents to yield 1.425%.

The 10-year yield touched its lowest intraday since June 2017 at 1.410%.

Reporting by Fergal Smith; Editing by Susan Thomas