Canadian dollar hits one-month low as U.S. yields climb

By Fergal Smith

TORONTO (Reuters) - The Canadian dollar weakened to a near one-month low against the greenback on Thursday as U.S. bond yields moved higher and the outcome of talks in Washington to raise the debt ceiling remained uncertain.

The loonie was trading 0.3% lower at C$1.3635 to the greenback, or 73.34 U.S. cents, after touching its weakest intraday level since April 28 at 1.3644.

"It has been all about the U.S. debt ceiling again today, with higher U.S. yields boosting the USD across the board," said George Davis, chief technical strategist at RBC Capital Markets.

U.S. Treasury yields rose as data suggested persistent strength in the U.S. labor market, while jitters about negotiations to lift the cap on U.S. government borrowing could be seen in Treasury bills that are due to mature in the coming days.

Another headwind for the Canadian currency was a drop in the price of oil, one of Canada's major exports. U.S. crude prices were down 3.6% at $71.64 a barrel after Russia played down the prospect of further OPEC+ production cuts at its meeting next week.

Meanwhile, domestic data showed payroll employment falling 9,900 in March, while growth in average weekly earnings slowed to an annual rate of 1.4% from 1.9% in February.

The Canadian 10-year yield touched its highest level since March 8 at 3.304% before dipping to 3.293%, up 2.5 basis points on the day.

Still, the gap between it and its U.S. equivalent widened by 5.9 basis points to 51 basis points in favor of the U.S. bond.

(Reporting by Fergal Smith; Editing by Richard Chang)