CANADA FX DEBT-Canadian dollar to nearly 3-month low as oil prices fall

* The Canadian dollar weakens 0.2% against the greenback

* Hit the lowest level since September 20 at 1.2886

* Canada’s annual inflation rate remains at 4.7% in November

* The price of US oil drops 0.7%

By Fergal Smith

TORONTO, Dec. 15 (Reuters) – The Canadian dollar weakened to its lowest level in nearly three months against its US counterpart on Wednesday as the fast-spreading Omicron variant weighed on oil prices and national data showed that inflation met expectations.

Canada’s annual inflation rate has remained at 4.7% in November, the highest since March 2003, as supply chain disruptions continued to put upward pressure on prices, according to Statistics Canada.

To fight inflation, investors are betting that Canada’s central bank will start raising interest rates in March or April.

“The market price is already aggressive enough for the Bank of Canada next year,” said Bipan Rai, head of foreign exchange strategy for North America at CIBC Capital Markets. “So we haven’t seen much reaction in USD-CAD because of it.”

Bank of Canada Governor Tiff Macklem is expected to speak on the central bank’s renewed monetary policy framework at 12:00 p.m. EST (5:00 p.m. GMT).

Inflation is also at decades-long highs in the United States. The Federal Reserve is expected to announce on Wednesday that it is accelerating the end of its purchases of bonds in the era of the pandemic and signal a turn towards higher interest rates next year. The U.S. central bank is due to release its latest policy statement and updated economic projections at 2 p.m. EST.

The price of oil, one of Canada’s top exports, has fallen as the World Health Organization says COVID-19 vaccines may be less effective against the Omicron variant.

U.S. crude prices fell 0.7% to $ 70.26 per barrel, while the Canadian dollar traded 0.2% to 1.2881 against the greenback, or 77.63 cents US. The Canadian dollar hit its lowest level since September 20 at 1.2886.

Canada on Tuesday cut its deficit forecast to C $ 144.5 billion for this fiscal year, as tax revenues rose and less emergency aid was used. The planned gross issuance of bonds and treasury bills was reduced from C $ 59 billion to C $ 453 billion.

The Canadian 10-year rate fell 2 basis points to 1.413%. (Report by Fergal Smith Editing by Paul Simao) (([email protected]; +1 647 480 7446;)) Keywords: CANADA FOREX / (PIX)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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