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By Fergal Smith
TORONTO, May 12 (Reuters) - The Canadian dollar weakened
to an eight-day low against its U.S. counterpart on Friday as
data showing rising inflation expectations in the United States
revived investor worries about another interest rate hike by the
Federal Reserve.
The loonie was trading 0.5% lower at C$1.3560 to the
greenback, or 73.75 U.S. cents, after touching its weakest level
since May 4 at 1.3565. For the week, the currency declined 1.4%.
Wall Street stocks fell as the University of Michigan's
preliminary reading on the overall index of consumer sentiment
slumped to a six-month low in May, while the survey's five-year
inflation outlook rose to 3.2%, its highest since 2011.
"What you got out of that (inflation data) was reflating
interest rate expectations for the Fed," said Jay Zhao-Murray,
market analyst at Monex Canada Inc. "That is the driving factor
at the heart of what is happening in FX markets."
Money markets see a 13% chance that the Fed will raise its
policy rate again at its next meeting in June. The price of oil, one of Canada's major exports, fell 1.3%
to $69.98 a barrel as the market balanced supply fears against
renewed economic concerns in the United States and China.
"The Chinese rebound doesn't seem to be progressing as well
as markets had hoped," Zhao-Murray said.
Meanwhile, data from the Bank of Canada's Senior Loan
Officer Survey showed that Canadian mortgage lending conditions
tightened sharply in the first quarter of the year.
The Canadian central bank lifted its policy rate to a
15-year high of 4.50% in January but has stayed on hold since
then.
Canadian government bond yields were higher across a flatter
curve, tracking moves in U.S. Treasuries. The 10-year was up 4.1 basis points at 2.875%.
(Reporting by Fergal Smith; Editing by Paul Simao)
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