CANADA FX DEBT-C$ hits 6-day low as U.S. inflation data spooks investors

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Canadian dollar weakens 0.7% against the greenback

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Touches its weakest since Friday at 1.37

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Price of U.S. oil settles 0.7% lower

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Canadian bond yields rise across steeper curve

By Fergal Smith

TORONTO, Oct 12 (Reuters) – The Canadian dollar weakened to a six-day low against its broadly stronger U.S. counterpart on Thursday as bond yields jumped after hotter-than-expected U.S. inflation data.

The loonie was trading 0.7% lower at 1.3690 to the greenback, or 73.05 U.S. cents, after touching its weakest intraday level since Friday at 1.37.

“The U.S. dollar is extremely strong across the board today and the Canadian dollar is simply caught in that,” said Adam Button, chief currency analyst at ForexLive.

“Higher U.S. rates make the U.S. dollar more attractive to foreign buyers. Moreover, the U.S. economy appears to be able to sustain high rates while we’re seeing cracks everywhere else, including Canada.”

U.S Treasury yields rose and the greenback rallied against a basket of major currencies after data showed consumer prices in the world’s largest economy came in higher than expected, suggesting that the Federal Reserve could raise interest rates one more time this year.

Canada’s economy is likely to be particularly sensitive to higher interest rates after households borrowed heavily during the pandemic to participate in a red-hot housing market.

Adding to pressure on the loonie, the price of oil, one of Canada’s major exports, settled 0.7% lower at $82.91 a barrel after data showed a large build in U.S. crude stockpiles.

Canadian government bond yields rose across a steeper curve, tracking moves in U.S. Treasuries. The 10-year was up 11.6 basis points at 4.042%. (Reporting by Fergal Smith; Editing by Richard Chang)