Canadian dollar slides to 1-week low ahead of BoC rate decision

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TORONTO — The Canadian dollar on Tuesday

weakened against its U.S. counterpart and all the other G10

currencies, as oil prices fell and investors weighed prospects

of the Bank of Canada turning more dovish at an interest rate

decision this week.

The loonie was trading 0.9% lower at 1.2647 to the

greenback, or 79.07 U.S. cents, the biggest decline among G10

currencies. The loonie touched its weakest intraday level since

Aug. 31 at 1.2652.

“The market is having doubts about the strength of the

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(Canadian) economy and whether the Bank of Canada will continue

to taper,” said Adam Button, chief currency analyst at

ForexLive.

The Bank of Canada is expected to keep interest rates on

hold at a record low of 0.25% on Wednesday and to wait until

October before cutting its bond purchases further, a Reuters

poll of economists showed.

Canada’s economy unexpectedly shrank in the second quarter

as shortages of microchips and other inputs curtailed trade in

motor vehicles and domestic consumption.

“There’s a growing fear that supply chain bottle necks could

dramatically dampen growth for many months to come,” Button

said.

The price of oil, one of Canada’s major exports, was

pressured by concerns about weak demand in the United States and

Asia as well as a strong U.S. dollar.

U.S. crude oil futures settled 1.4% lower at $68.35 a

barrel, while the greenback rallied against a basket of major

currencies, bolstered by rising U.S. Treasury yields.

Canadian government bond yields also moved higher as the

Canadian market reopened following Monday’s Labour Day holiday.

The 10-year was up 4.4 basis points at 1.232%.

(Reporting by Fergal Smith; Editing by Emelia Sithole-Matarise

and Sandra Maler)