TORONTO, Sept 16 (Reuters) - The Canadian dollar weakened to a six-week low against its U.S. counterpart on Wednesday, as expectations rose for additional interest rate hikes from the Federal Reserve after the U.S. central bank tightened for the first time in three years.
The loonie was trading 0.5% lower at 1.3990 per U.S. dollar, or 71.48 U.S. cents, after touching its weakest intraday level since August 7 at 1.3994.
The Fed raised its benchmark interest rate by a quarter of a percentage point to the 3.75%-4.00% range and flagged further increases in borrowing costs in coming months, aiming for a timelier return of inflation to its 2% target.
"The U.S. dollar is grinding higher against all of its major rivals and Treasury yields are edging up across the policy-sensitive end of the curve as investors incrementally raise expectations for another hike by the central bank's December meeting," Karl Schamotta, chief market strategist at Corpay, said in a note.
The Bank of Canada could also tighten in the coming months, according to swap market data . Ahead of the central bank's September 2 interest rate decision, governors agreed inflation was likely to remain elevated in the near term, minutes of the meeting showed.
The price of oil, one of Canada's major exports, fell as reports that Saudi Arabia was offering additional crude cargoes via Oman eased concerns about the scale of Middle East supply disruptions. U.S. crude oil futures settled 3.2% lower at $102.43 a barrel.
Domestic data showed that housing starts edged down to a seasonally adjusted annualized rate of 229,046 units from a revised 229,360 units in July. Economists had expected starts to rise to 240,000.
Canadian government bond yields were mixed across a flatter curve. The 2-year rose 2 basis points to 3.376%, while the 10-year was down 1.1 basis points at 3.941%, extending its pullback from a near three-year high on Monday at 3.987%.
Reporting by Fergal Smith; Editing by Will Dunham
