C$ hits 5-month low as U.S. inflation data underpins greenback

FILE PHOTO: A Canadian dollar coin, commonly known as the “Loonie”, is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch/File Photo

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar weakened to a near five-month low against its U.S. counterpart on Thursday as oil prices fell and U.S. inflation data suggested a delayed start to Federal Reserve interest rate cuts.

The loonie edged 0.1% lower to 1.3685 per U.S. dollar, or 73.07 U.S. cents, after touching its weakest intraday level since Nov. 22 at 1.3725.

“The greenback is powering higher against all rivals, overwhelming any domestic fundamentals,” said Karl Schamotta, chief market strategist at Corpay.

“That’s on the back of yesterday’s hotter-than-expected U.S. inflation print and today’s firmer than anticipated rise in services inflation, all of which is setting the stage for a later start to the U.S. easing cycle and a shallower outcome.”

U.S. producer price data for March showed the cost of services rising 0.3% after climbing by the same margin in February. It follows the release on Wednesday of consumer price data that rattled investors.

The loonie fell to a five-month low after the Bank of Canada said on Wednesday that a June interest rate cut was possible if a recent cooling trend in inflation is sustained.

Money markets expect the Canadian central bank to ease by 58 basis points this year compared to 43 basis points by the Fed. <0#BOCWATCH<

The price of oil, one of Canada’s major exports, settled 1.4% lower at $85.02 a barrel following a major U.S. refinery outage.

The Canadian 10-year yield rose 3.2 basis points to 3.728%, after touching its highest level since Nov. 16 at 3.763%.

(Reporting by Fergal Smith; Editing by Richard Chang)