TORONTO, Aug 12 (Reuters) - The Canadian dollar recovered on Tuesday from an earlier one-week low against its U.S. counterpart after the release of U.S. inflation data that did not change expectations that the Federal Reserve would cut interest rates in September.
The loonie was trading 0.2% higher at 1.3755 per U.S. dollar, or 72.70 U.S. cents, after touching its weakest intraday level since August 5 at 1.3806.
"Given that the U.S. inflation print did not surprise to the upside it is likely we will see a reversal in USD-CAD near-term," said Sarah Ying, head of foreign exchange strategy at CIBC Capital Markets, adding that there is strong support for the pair in the 1.36 area.
U.S. consumer prices increased moderately in July, though rising costs for services such as airline fares and tariff-sensitive goods like household furniture caused a measure of underlying inflation to post its largest gain in six months.
Uncertain prospects for U.S. tariffs on Canadian goods and weaker-than-expected domestic employment data had pressured the loonie in recent days as the market considered pricing in more interest rate cuts from the Bank of Canada, Ying said.
Minutes from the BoC's most recent policy decision, which resulted in the benchmark interest rate being left on hold at 2.75%, are due on Wednesday. Investors see a roughly 50% chance that the central bank will resume its easing campaign by October.
Not all was positive for the Canadian currency, however.
China announced preliminary anti-dumping duties on Canadian canola imports in a new escalation of a year-long trade dispute and the price of oil, one of Canada's major exports, was trading 1% lower at $63.31 a barrel.
Canadian bond yields rose across a steeper curve. The 10-year was up 4.5 basis points at 3.441%, after earlier hitting its highest since August 1 at 3.466%.
Reporting by Fergal Smith, editing by Ed Osmond
