TORONTO, May 7 (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday as oil prices fell and investors weighed the Federal Reserve's patient stance on cutting interest rates.
The loonie was trading 0.3% lower at 1.3915 per U.S. dollar, or 72.39 U.S. cents, after moving in a range of 1.3764 to 1.3820.
The Fed held interest rates steady, as expected, but said the risks of higher inflation and unemployment had risen, further clouding the economic outlook as the U.S. central bank grapples with the impact of Trump administration tariff policies.
"The Fed still appears to be prioritizing guarding its inflation mandate to ensure longer-term inflation expectations remain well-anchored," Scott Anderson, chief U.S. economist at BMO Capital Markets, said in a note.
"This raises the risk that the Fed will be a little late to cutting rates to forestall a deeper slowdown in the economy."
The U.S. dollar strengthened against a basket of major currencies, but its gains were capped by uncertainty over upcoming trade negotiations, including expected U.S.-China talks this weekend.
The price of oil, one of Canada's major exports, gave up some of the previous day's sharp gains. U.S. crude futures settled 1.7% lower at $58.07 a barrel.
Canadian employment data for April, due on Friday, could offer clues on the strength of the domestic economy. The median forecast is for a modest gain of 2,500 jobs, while the unemployment rate is expected to edge up to 6.8% from 6.7% in March.
Investors see a roughly 50% chance that the Bank of Canada will cut interest rates by 25 basis points in June after pausing its easing campaign last month.
Canadian bond yields moved lower across a flatter curve, tracking moves in U.S. Treasuries. The 10-year was down 4.2 basis points at 3.108%.
Reporting by Fergal Smith; Editing by Paul Simao
