TORONTO: The Canadian dollar weakened against the greenback on Wednesday as fears that soaring energy prices would boost inflation contributed to a selloff in global equity markets, with the loonie pulling back from a four-week high hit the day before.

The loonie was trading 0.2% lower at 1.2610 to the greenback, or 79.30 US cents, after trading in a range of 1.2576 to 1.2647. On Tuesday, the currency touched its strongest intraday level since Sept. 7 at 1.2541.

Shares fell globally and the safe-haven US dollar rose against a basket of major currencies as oil prices hit their highest in seven years, fuelling concerns about rising inflation.

Investors fear that accelerating inflation could force central banks to tighten policy sooner than expected.

Canadian dollar steadies as imports decline boosts trade surplus

US private payrolls increased more than expected in September as COVID-19 infections started subsiding, adding to support for the greenback.

Canada is a major oil producer, so the loonie has performed better than most other G10 currencies as energy prices climbed in recent weeks.

Oil gave back some recent gains but only after it hit a multi-year high on an OPEC+ refusal to ramp up production more rapidly. US crude prices were down 1.7% at $77.57 a barrel.

Canada's employment report for September is due on Friday, which could offer clues on the Bank of Canada policy outlook. Analysts expect the central bank to further cut its bond purchase program later this month.

Canadian government bond yields were lower across much of a flatter curve. The 10-year eased 1.6 basis points to 1.517%, after touching its highest since May 25 at 1.554% earlier in the session.