C$ hits 2-week low as Fed officials lean hawkish

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TORONTO — The Canadian dollar weakened to

its lowest level in nearly two weeks against its U.S.

counterpart on Thursday as comments by Federal Reserve officials

on the outlook for interest rates bolstered the greenback

against a basket of major currencies.

The loonie was trading 0.2% lower at 1.2940 to the

greenback, or 77.28 U.S. cents, after touching its weakest since

Aug. 5 at 1.2966.

Fed policymakers are “pushing the market’s perception” of a

more aggressive rate hike at the September policy announcement

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than had been expected after softer-than-expected inflation data

last week, said Michael Goshko, senior market analyst at Convera

Canada ULC.

St. Louis Fed President James Bullard was reported to have

said he is leaning towards a 75 basis points hike next month,

while San Francisco Federal Reserve President Mary Daly said

that raising rates by either 50 or 75 basis points would be

“reasonable.”

The U.S. dollar currency index notched a three-week

high.

The loonie lost ground even as the price of oil, one of

Canada’s major exports, was supported by robust U.S. fuel

consumption data. U.S. crude prices settled 2.7% higher

at $90.50 a barrel.

Domestic data showed that producer prices fell by 2.1% in

July from June. Still, they were up 11.9% on an annual basis.

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Canadian inflation is not likely to return to the central

bank’s 2% target until 2024 after possibly peaking in June, as

less volatile items like wages and rent displace energy as key

sources of price pressure, analysts say.

Canadian retail sales data for June, due on Friday, could

offer more clues on the domestic economy’s outlook.

Canadian government bond yields were mixed across the curve.

The 10-year eased nearly one basis point to 2.852%,

after touching on Wednesday its highest intraday level in more

than three weeks at 2.890%.

(Reporting by Fergal Smith;

Editing by Alison Williams and Grant McCool)