Canadian dollar falls to nearly six-week low

Canadian Loonies, otherwise known as a one dollar coin, are displayed on top of an American currency in this posed photograph in Toronto, October 10, 2008. REUTERS/Mark Blinch

The Canadian dollar weakened to a nearly six-week low against its U.S. counterpart on Wednesday as oil prices fell and risk appetite remained constrained.

A recent rise in bond yields, triggered in part by deepening worries over the difficulty of the world’s major central banks to stimulate growth, kept investors in broadly risk-off mode.

The rise in bond yields weighs on higher-yielding commodity-linked currencies such as the Canadian dollar.

READ MORE: Canadian families should plan for lower retirement income

Oil fell despite data from an industry group that showed a smaller-than-expected build in U.S. crude stockpiles. U.S. crude prices were down 0.60 percent at $44.63 a barrel.

At 8:51 a.m. ET, the Canadian dollar was trading at $1.3186 to the greenback, or 75.84 U.S. cents, slightly weaker than Tuesday’s close of $1.3170, or 75.93 U.S. cents.

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The strongest level of the session for the currency was $1.3128, while it touched its weakest since Aug. 5 at $1.3200.

The reduced potential for global economic growth and resultant lower neutral interest rates could pose risks for financial stability, Bank of Canada Senior Deputy Governor Carolyn Wilkins said.

READ MORE: Raising concerns about economy, Bank of Canada keeps key interest rate unchanged at 0.5% 

Wilkins also reiterated the dovish message of last week’s statement from the central bank, saying there were downside risks to Canadian inflation due to question marks about exports.

Austrian Chancellor Christian Kern’s opposition to a free trade agreement between the European Union and Canada was countered by fervent praise for the deal from his deputy at a special parliamentary session on the matter.

On Monday, Canadian Trade Minister Chrystia Freeland said her country was working toward signing a new trade agreement with the European Union in October.

READ MORE: Fort McMurray wildfire takes toll on Canadian economy; GDP posts worst showing since 2009

Canadian government bond prices were higher across the yield curve, with the two-year up 2.5 Canadian cents to yield 0.589 percent and the benchmark 10-year rising 32 Canadian cents to yield 1.196 percent.

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Earlier in the session, the 10-year yield touched its highest since June 23 at 1.281 percent.

Canadian home prices climbed 11.4 percent in August from a year earlier, data showed. Leading the gains were the two hottest markets, Vancouver and Toronto, where prices have more than doubled in just over 11 years.

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