The Canadian dollar fell the most since December despite the hawkish BoC

TORONTO (Reuters) – The Canadian dollar weakened on Friday to a five-week low against its U.S. counterpart as oil prices fell and the greenback rallied overall, with the loonie slipping despite the fact that the Bank of Canada has opened the door to further interest rate hikes.

The U.S. dollar rallied against a basket of major currencies after Federal Reserve Chairman Jerome Powell sent a clear message on Thursday that a half-point interest rate hike “will be on the way. the table” when the U.S. central bank meets May 3-4. .

The price of oil, one of Canada’s top exports, has been weighed down by the prospect of weaker global growth, higher interest rates and COVID-19-related lockdowns in China, which has harm to demand.

U.S. crude prices fell nearly 2% to $101.75 a barrel, while the Canadian dollar traded down 0.8% to 1.2685 for the greenback, or 78.83 US cents , its biggest drop since December last year.

The currency touched its lowest level since March 17 at 1.2688 and was on track to decline 0.6% for the week.

The Bank of Canada may consider a bigger rate hike than the half-point move it made last week as the central bank struggles to rein in inflation, which is at an all-time high level in 31 years, Gov. Tiff Macklem said Thursday.

Money markets have fully priced in another half-point hike in the next policy move on June 1 and sees around a 10% chance of a three-quarter point hike.

Canadian retail sales edged up 0.1% in February from January, as higher sales at clothing stores and gas stations offset lower sales at motor vehicle and parts dealers, said Statistics Canada. A preliminary estimate showed sales growth of 1.4% in March.

Yields on Canadian government bonds rose on a flatter curve, following the performance of US Treasuries. The 2-year rose 8.4 basis points to 2.718%, its highest since October 2008.

(Reporting by Fergal Smith; editing by Jonathan Oatis)

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