* Canadian dollar at C$1.3477, or 74.20 U.S. cents
* Bond prices mixed across steeper yield curve
By Fergal Smith
TORONTO, May 31 The Canadian dollar weakened
against its U.S. counterpart on Wednesday as a drop in oil
prices offset data showing strength in the domestic economy.
Canada's gross domestic product grew at an annualized 3.7
percent pace, slightly below economists' expectations for 3.9
percent, though growth in both the third and fourth quarters of
2016 was revised upward.
The economy also appeared to have solid momentum heading
into the second quarter with growth rising by a
better-than-expected 0.5 percent in March.
"If we continue to get growth numbers like this ... it's
going to be tougher for the Bank of Canada to avoid rate hikes
at some point in the distance," said Derek Holt, head of capital
markets economics at Scotiabank.
The central bank last week struck a more upbeat tone than
investors had expected as it kept interest rates on hold at 0.5
Chances of a Bank of Canada rate hike this year have
increased to 30 percent from roughly one-in-ten before the
interest rate decision, data from the overnight index swaps
Prices of oil, one of Canada's major exports, fell on
Wednesday to a three-week low on news that Libyan output was
recovering from an oilfield technical issue, fuelling concerns
that Organization of the Petroleum Exporting Countries-led
output cuts were being undermined by producers outside the deal.
U.S. crude prices were down 2.52 percent at $48.41 a
At 9:21 a.m. ET (1321 GMT), the Canadian dollar was
trading at C$1.3477 to the greenback, or 74.20 U.S. cents, down
The currency traded in a range of C$1.3438 to C$1.3479 after
having hit on Tuesday its weakest in nearly one week at
Canadian government bond prices were mixed across a slightly
steeper yield curve. The two-year was flat to yield
0.70 percent and the 10-year declined 6 Canadian
cents to yield 1.421 percent.
On Monday, the 10-year yield hit its lowest intraday level
in six months at 1.399 percent.
Canada's trade data for April is due on Friday.
(Additional reporting by Alastair Sharp; Editing by Meredith