TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Wednesday as lower oil prices offset domestic data showing a pickup in underlying inflation, while investors awaited an interest rate decision from the Bank of Canada.
The loonie was trading 0.2% lower at 1.2628 to the greenback, or 79.19 U.S. cents, having touched its weakest intraday level since April 7 at 1.2634.
Canada's annual inflation rate in March accelerated to 2.2%, both on higher gasoline prices and because of the effect of last year's sharp deceleration caused by the coronavirus pandemic, Statistics Canada said. The average of the Bank of Canada's three core measures was 1.9%, up from 1.8%.
The central bank is due to update its growth and inflation forecasts at 10 a.m. (1400 GMT). It could also cut the pace of its bond purchases, analysts say.
Oil prices fell for a second day, weighed down by concerns that surging COVID-19 cases in India will drive down fuel demand in the world's third-biggest oil importer. U.S. crude oil futures were down 2.2% at $61.32 a barrel, while Wall Street was set for a lower open.
Canadian government bond yields were mixed across a flatter curve, with the 10-year falling nearly 1 basis point to 1.495%.