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Canadian dollar weakens 0.4% against the greenback
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Canada's annual inflation rate cools to 5.2%
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Price of U.S. oil settles 2.5% higher
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Canada-U.S. 2-year spread widens 15.6 basis points
(Adds analyst comment, details throughout, updates prices)
By Fergal Smith
TORONTO, March 21 (Reuters) - The Canadian dollar
weakened against its U.S. counterpart on Tuesday, pulling back
from an earlier two-week high, as domestic inflation data
supported the Bank of Canada's recent decision to pause its
interest rate hiking campaign.
Canada's annual inflation rate slowed more than expected to
5.2% in February, its lowest level in 13 months, benefiting from
a comparison to last year's strong price increase.
"These are encouraging trends that basically confirms the
pause that the Bank of Canada initiated at its last meeting,"
said Michael Goshko, senior market analyst at Convera Canada
ULC.
The BoC left its benchmark interest rate on hold at 4.50%
earlier this month, becoming the first major central bank to
move to the sidelines.
Since then, turmoil in the global banking sector has raised
pressure on other central banks to dial back tightening. The
Federal Reserve is due to make an interest rate decision on
Wednesday.
The Canadian dollar was trading down 0.4% at 1.3725
to the U.S. currency, or 72.86 U.S. cents. It touched its
strongest level since March 7 at 1.3645 before moving lower.
"It (USD-CAD) tried for two days to break down through the
1.3650 level and then sellers gave up ahead of tomorrow's big
(Fed) meeting."
The price of oil, one of Canada's major exports, extended
its recovery from a 15-month low it hit the previous day. U.S.
crude oil futures settled 2.5% higher at $69.33 a barrel.
Canadian government bond yields were higher across the curve, tracking the move in U.S. Treasuries. The 2-year rose 9.5 basis points to 3.712% but was trading 15.6 basis points further below its U.S. equivalent to a gap of about 46 basis points. (Reporting by Fergal Smith; editing by Jonathan Oatis and Jane Merriman)
