OTTAWA- The Canadian dollar lost ground against its broadly stronger U.S. counterpart on Thursday as oil prices fell and data showed a widening in Canada's trade deficit, with the loonie extending its pullback from an eight-month high on Tuesday.
Canada posted a trade deficit of C$2.45 billion in July as imports climbed at a faster pace than exports, data from Statistics Canada showed. June's deficit was revised lower to C$1.59 billion.
The price of oil, one of Canada's major exports, dropped as worries about weaker U.S. gasoline demand and a sluggish economic recovery from the COVID-19 pandemic dented sentiment. U.S. crude prices were down 1.8% at $40.77 a barrel.
The U.S. dollar extended its rebound from a two-year low before paring some gains, as European Central Bank policymakers reportedly expressed concern about the economic impact of the euro's recent rise.
The Canadian dollar was trading 0.5% lower at 1.3107 to the greenback, or 76.30 U.S. cents, which was its biggest decline in nearly one month. The currency, which notched on Tuesday its strongest intraday level since Jan. 8 at 1.2990, traded in a range of 1.3040 to 1.3117.
Canada's employment report for August is due on Friday, which could offer clues on the strength of economic recovery, while the Bank of Canada is due to make a policy announcement next week.
Since March, the central bank has slashed interest rates to nearly zero and begun buying government bonds in large scale.
Canadian government bond yields edged lower across the curve on Thursday, with the 10-year down 0.4 basis points at 0.547%. It touched its lowest intraday since Aug. 24 at 0.539%.
(Reporting by Fergal Smith; Editing by Andrea Ricci) ((fergal.smith@thomsonreuters.com; +1 416 941 8113;))
