(New throughout)By Fergal SmithTORONTO, May 12 (Reuters) - The Canadian dollar weakened to an eight-day low against its U.S. counterpart on Friday as
(New throughout)
By Fergal Smith
TORONTO, May 12 (Reuters) – The Canadian dollar weakened to an eight-day low against its U.S. counterpart on Friday as data showing rising inflation expectations in the United States revived investor worries about another interest rate hike by the Federal Reserve.
The loonie was trading 0.5% lower at C$1.3560 to the greenback, or 73.75 U.S. cents, after touching its weakest level since May 4 at 1.3565. For the week, the currency declined 1.4%.
Wall Street stocks fell as the University of Michigan’s preliminary reading on the overall index of consumer sentiment slumped to a six-month low in May, while the survey’s five-year inflation outlook rose to 3.2%, its highest since 2011.
“What you got out of that (inflation data) was reflating interest rate expectations for the Fed,” said Jay Zhao-Murray, market analyst at Monex Canada Inc. “That is the driving factor at the heart of what is happening in FX markets.”
Money markets see a 13% chance that the Fed will raise its policy rate again at its next meeting in June.
The price of oil, one of Canada’s major exports, fell 1.3% to $69.98 a barrel as the market balanced supply fears against renewed economic concerns in the United States and China.
“The Chinese rebound doesn’t seem to be progressing as well as markets had hoped,” Zhao-Murray said.
Meanwhile, data from the Bank of Canada’s Senior Loan Officer Survey showed that Canadian mortgage lending conditions tightened sharply in the first quarter of the year.
The Canadian central bank lifted its policy rate to a 15-year high of 4.50% in January but has stayed on hold since then.
Canadian government bond yields were higher across a flatter curve, tracking moves in U.S. Treasuries. The 10-year was up 4.1 basis points at 2.875%. (Reporting by Fergal Smith; Editing by Paul Simao)
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