TORONTO: The Canadian dollar weakened against its U.S. counterpart on Wednesday, pulling back from an eight-week high, as oil prices fell and investors weighed domestic inflation data that could leave the door open to a smaller rate Bank of Canada rate hike.

Canada’s annual inflation rate held steady at 6.9% in October, matching analyst forecasts, while core inflation measures were mixed, Statistics Canada data showed.

Money markets have fully priced in a 25 basis point interest rate hike by the BoC at its next policy decision on Dec. 7 and see a 35% chance of a larger hike of 50 basis points, up from about 30% before the data.

The central bank hiked by 50 basis points last month, lifting its policy rate to a 14-year high of 3.75%.

The price of oil, one of Canada’s major exports, fell as geopolitical tensions following an attack on an oil tanker off the coast of Oman were offset by concerns over rising COVID-19 cases in China.

U.S. crude prices fell 2% to $85.16 a barrel, while the Canadian dollar was trading 0.2% lower at 1.33 to the greenback, or 75.19 U.S. cents.

The currency moved in a range of 1.3229 to 1.3308, after touching on Tuesday its strongest level since Sept. 20 at 1.3225.

Canadian government bond yields were mixed across a more deeply inverted curve. The 2-year rose 2.7 basis points to 3.870%, while the 10-year was down 2.3 basis points at 3.098%.