TORONTO, Dec 16 (Reuters) - The Canadian dollar touched a 4-1/2-year low against its U.S. counterpart on Monday before recouping its losses and Canadian bond yields rose, as investors weighed the fiscal implications of the unexpected resignation of Canada's finance minister.
The loonie was trading nearly unchanged at 1.4225 to the U.S. dollar, or 70.30 U.S. cents, after touching its weakest intraday level since April 2020 at 1.4268.
Canada's Finance Minister Chrystia Freeland resigned over a policy clash with Prime Minister Justin Trudeau, dismissing his plans for increased spending as "political gimmicks".
Freeland quit just hours before she was due to present a fall economic update to parliament, a document widely expected to show the minority Liberal government had run up a much larger 2023/24 budget deficit than predicted.
"In many places in the world, the resignation of the finance minister would be a crushing blow to the currency but the market appears to have fully discounted a period of political uncertainty, and inevitable change in government," said Adam Button, chief currency analyst at ForexLive.
Trudeau trails badly in polls ahead of an expected election in 2025.
The U.S. dollar (.DXY), opens new tab hovered close to a three-week high versus other major currencies, ahead of a week of central bank meetings in which markets expect the Federal Reserve to cut interest rates but signal a measured pace of easing for 2025.
The price of oil , one of Canada's major exports, fell 0.6% to $70.88 a barrel as investors weighed weak consumer spending data in China, the world's largest oil importer.
Canadian government bond yields moved higher across the curve. The 10-year was up 3.7 basis points at 3.215%, after touching its highest intraday level since Nov. 28 at 3.234%.
Reporting by Fergal Smith, Editing by Nick Zieminski
