Canadian dollar weakens ahead of US deadline for new tariffs

Long-term borrowing costs from the U.S. to Japan and Germany rose to their highest levels in decades, as renewed inflation worries added to lingering concerns about fiscal pressures across major economies, dealing bond markets a fresh blow.

The Canadian dollar gave back some recent gains against its U.S. counterpart on Tuesday and bond yields edged off multi-year highs, as investors weighed prospects of Canada reaching a deal with Washington to avoid new tariffs on its goods.

The loonie CAD= was trading 0.2% lower at 1.39 per U.S. dollar, or 71.94 U.S. cents, after touching its highest level in more than two months on Monday at 1.3842.

• West Texas Intermediate oil futures CLc1 rose 0.6% to $85.03 a barrel as prospects receded for a deal to end the Middle East war, heightening worries about prolonged energy supply disruptions. Oil is one of Canada's main exports.
• Canadian home sales rose for a fourth straight month in July, increasing 0.5% from June, and prices edged higher.
• "Canada's housing market is stabilizing, and we've probably found the floor for this long cycle," Robert Kavcic, a senior economist at BMO Capital Markets, said in a note.
• Separate data for July showed that housing starts unexpectedly fell, declining 5% compared to the previous month.
• Canadian government bond yields eased by two to three basis points across the curve, but only after the 30-year CA30YT=RR touched its highest level since January 2010 at 4.173%.