Canadian dollar drops by most in 6 weeks as greenback rallies

·2 min read
FILE PHOTO: A Canadian dollar coin, commonly known as the "Loonie," is pictured in this illustration picture taken in Toronto

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar fell to a six-day low against its broadly stronger U.S. counterpart on Thursday, as U.S. economic data reinforced signs that the world's largest economy was on track to recover from the COVID-19 pandemic.

The loonie, which has been on a tear this year because of higher commodity prices and the Bank of Canada's more hawkish stance, was trading 0.6% lower at 1.2106 to the greenback, or 82.60 U.S. cents, its biggest decline since April 20. It touched its weakest intraday level since last Friday at 1.2120.

"Today has been all about the (U.S.) dollar," said Simon Harvey, senior FX market analyst for Monex Europe and Monex Canada. "With little economic releases outside of the U.S., the loonie has been entangled in the broad dollar move."

The U.S. dollar rose against a basket of major currencies as data showed U.S. private-sector employment rising more than expected in May. A strong rebound in the U.S. economy threatens to derail the assumption that interest rates will stay low for a long time.

The U.S. and Canadian employment reports for May are due on Friday. Economists expect the data to show Canadian employment falling by 20,000 after a plunge of 207,000 in April. Some provinces went into lockdown in April to curb a harsh third wave of the COVID-19 pandemic.

Still, the Bank of Canada is seen tapering its asset purchase program again next quarter amid expectations for a robust economic recovery, a Reuters poll showed.

Oil, one of Canada's major exports, touched its highest level since October 2018 at $69.40 a barrel before settling 2 cents lower at $68.81 a barrel.

Canadian government bond yields were higher across much of a steeper curve, tracking the move in U.S. Treasuries. The 10-year was up 2.2 basis points at 1.517%.

(Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter Cooney)

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