The Canadian dollar weakened to its lowest in more than one week against its US counterpart on Friday as investors guarded against the risk that the Federal Reserve would shift next week to a less dovish stance.
Money markets expect the Fed to cut interest rates next Wednesday, but they have been scaling back the amount of additional easing they see over the coming year.
"The US dollar is in demand because the market increasingly believes that the Federal Reserve won't cut interest rates as much as previously thought," said Adam Button, chief currency analyst at ForexLive.
At 2:57 pm (1857 GMT), the Canadian dollar was trading 0.5% lower at 1.3277 to the greenback, or 75.32 US cents. The currency, which touched its weakest intraday level since Sept. 4 at 1.32783, was down 0.8% for the week.
The decline for the loonie came as data from Statistics Canada showed that the ratio of Canadian household debt-to-income widened to a record 174.1% in the second quarter from a downwardly revised 172.8% in the first quarter and that the debt service ratio rose to 14.9%.
Canadian government bond prices were lower across a steeper yield curve in sympathy with US Treasuries. The two-year fell 6.5 Canadian cents to yield 1.641% and the 10-year was down 64 Canadian cents to yield 1.517%.
The 10-year yield touched its highest intraday level since July 19 at 1.521%.
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