Canadian dollar drops as investors consider hot U.S. inflation data

On Thursday, the Canadian dollar fell against the greenback as data showed that U.S. inflation rose to a 40 year high in January. This raised expectations of aggressive Federal Reserve interest rate increases.

Canadian dollar drops as investors consider hot U.S. inflation data

U.S. bond yields rose and the greenback rallied to a basket of major currencies, as the U.S. consumer prices index rose at an annual rate 7.5%. This fuelled speculation about a Fed interest rate hike of 50 basis points next month.

After trading in a range from 1.2666 to 1.2717, the Canadian dollar fell 0.3% to 1.2707, or 78.70 U.S.cents.

The currency's decline was caused by the closure of an important U.S.-Canada trade route as a result of protests against Canada's pandemic policies.

Oil, Canada's largest export, was under pressure by potential U.S.-Iran nuke talks that could lead to an increase global crude oil supplies. U.S. U.S. crude oil prices dropped 0.5% to $89.26 per barrel.

The curve showed that Canadian government bond yields were higher than the U.S. Treasuries.

The 10-year rose by 4.7 basis points to 1.894%, moving closer towards the 1.905% peak in January. This was its highest level for nearly three years.

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