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Canadian dollar weakens 0.6% against greenback
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Canada's annual inflation rate eases to 5.9% in January
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Price of U.S. oil settles 0.2% lower
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10-year yield climbs to a 3-month high
(Adds economist quote and details throughout, updates prices)
By Fergal Smith
TORONTO, Feb 21 (Reuters) - The Canadian dollar weakened
to its lowest level in nearly seven weeks against its U.S.
counterpart on Tuesday as Wall Street tumbled and domestic
inflation data supported the Bank of Canada's move to signal a
pause in its tightening campaign.
Canada's annual inflation rate eased more than expected in
January to 5.9%, which should allow the BoC to keep its
benchmark interest rate steady at 4.50% at its next meeting in
March while it lets previous rate increases sink in.
The data suggests that "the Bank of Canada has already done
enough to bring inflation under control," Andrew Grantham, a
senior economist at CIBC Capital Markets, said in a note.
Money markets expect the central bank will be forced to
tighten again by the second half of the year but with less
certainty than before the data. The Canadian dollar was trading 0.6% lower at 1.3535
to the greenback, or 73.88 U.S. cents, after touching its
weakest since Jan. 6 at 1.3549.
The decline for the loonie came as U.S. stock indexes fell
sharply and the safe-haven U.S. dollar gained ground
against a basket of major currencies.
The price of oil , one of Canada's major exports,
settled 0.2% lower at $76.16 a barrel.
Canadian government bond yields were higher across the
curve, tracking the move in U.S. Treasuries and German Bunds
following stronger-than-expected business activity data in the
euro zone.
The 10-year touched its highest level since Nov.
9 at 3.430%, up as much as 13.6 basis points on the day.
(Reporting by Fergal Smith; Editing by Paul Simao and Alistair
Bell)
