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Canadian dollar falls from 8-week high after US raises interest rates

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch

The Canadian dollar tumbled from an eight-week high against its U.S. counterpart on Wednesday, pressured by lower oil prices and broader gains for the greenback after the Federal Reserve raised U.S. interest rates for the first time in a year.

The U.S. central bank raised rates by a quarter percentage point and signaled a faster pace of increases in 2017 as the Trump administration takes over with promises to boost growth through tax cuts, spending and deregulation.

READ MORE: How a US interest rate hike affects Canadians, oil and the loonie

“The Fed was a little bit more hawkish than expected in the (policy path chart) and that is why we have seen the U.S. dollar higher pretty much across the board,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.

Prices of oil, one of Canada’s major exports, fell as the U.S. dollar jumped after the Fed decision and after a jump in crude inventories at the biggest U.S. storage center renewed concerns about a glut.

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U.S. crude prices were down 4.02 percent at US$50.85 a barrel.

The Canadian dollar ended the day at C$1.3274 to the greenback, or 75.34 U.S. cents, much weaker than Tuesday’s close of C$1.3133, or 76.14 U.S. cents.

The currency’s weakest level was C$1.3294, while it touched its strongest since Oct. 19 at C$1.3081.

WATCH: How will the loonie react with news that a rate hike is coming from the U.S. Federal Reserve? Tyler Orton from Business in Vancouver has the details.

Click to play video: 'BIV: U.S. Federal Reserve rate hike impact on Canada' BIV: U.S. Federal Reserve rate hike impact on Canada
BIV: U.S. Federal Reserve rate hike impact on Canada – Dec 14, 2016

The loonie had gained steadily in recent weeks on the back of higher oil prices after major producers agreed to cut output.

Canadian home prices rose in November from a month earlier as prices continued to soar in Toronto, the biggest market, helping to drive household debt to another record, separate reports showed on Wednesday.

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Canadian government bond prices moved lower across a flatter yield curve in sympathy with U.S. Treasuries. The two-year fell 5.5 Canadian cents to yield 0.807 percent and the benchmark 10-year declined 28 Canadian cents to yield 1.789 percent.

On Tuesday, the 10-year yield touched its highest since June 2015 at 1.794 percent.

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