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C$ dips as investors eye seasonally weak period for the currency

·1 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 weakened against its U.S. counterpart on Tuesday, adding to its August decline, as cautious trading gripped financial markets ahead of a key U.S. inflation report this week.

The Canadian dollar was down 0.3% at 1.2895 to the greenback, or 77.55 U.S. cents, after trading in a range of 1.2844 to 1.2900.

"The broader tone appears to be dominating and CAD is trading in tandem with risk, given modest weakness across global equity indices," said Eric Theoret, global macro strategist at Manulife Investment Management.

Wall Street slipped, including pressure on technology stocks, as investors awaited Wednesday's U.S. inflation data for clues on the Federal Reserve policy outlook.

"The CAD has traded weaker for much of August and is entering a seasonally weak period, given its tendency to decline (versus the U.S. dollar) from late summer into year end," Theoret said.

The loonie has weakened 0.8% since the start of the month. It has lost ground in August for seven of the last eight years.

The price of oil, one of Canada's major exports, settled 0.3% lower at $90.50 a barrel as worries that a slowing economy could cut demand vied with news that some oil exports had been suspended on the Russia-to-Europe Druzhba pipeline that transits Ukraine.

Canadian government bond yields were higher across the curve, tracking the move in U.S. Treasuries.

The 10-year rose 4.3 basis points to 2.720%, toward the middle of its range over the last few days.

(Reporting by Fergal Smith; Editing by David Holmes and Marguerita Choy)