Canadian dollar hits one-week low amid Federal Reserve rate hike jitters

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The Canadian dollar CADUSD weakened against its U.S. counterpart on Wednesday as the prospect of higher U.S. interest rates weighed on investor sentiment and domestic data showed housing starts fell more than expected in March.

Global stocks were down, while a rally in the U.S. dollar gained momentum, as investor focus honed in on what the Federal Reserve may have to do to tame inflation, rather than on recent problems in the U.S. banking sector.

The price of oil, one of Canada’s major exports, was down 1.60 per cent at $79.57 a barrel, as potential Fed tightening that could slow growth outweighed strong Chinese economic data and falling U.S. inventories.

The Canadian dollar was trading 0.3 per cent per cent lower at 1.3430 to the greenback, or 74.46 U.S. cents, after touching its weakest intraday level since last Wednesday at 1.3453.

Canadian housing starts fell 11 per cent in March to 213,865 units from a revised 240,927 in February, the Canadian Mortgage and Housing Corporation (CMHC) said. Economists had expected starts to fall to 237,800.

Separate data showed that Canadian producer prices rose by 0.1 per cent in March from February but were down 1.8 per cent on an annual basis.

Canadian government bond yields were higher across much of the curve, tracking moves in U.S. Treasuries. The 10-year rose 1.1 basis points to 3.073 per cent.

Canada is due to auction C$5-billion ($3.7-billion) of 5-year bonds, with the bidding deadline set for 12 p.m. ET (1600 GMT).