Investors pedalled into another cycle of selling as the U.S. dollar tightened its stranglehold on currency markets, recession fears sapped stocks and bonds suffered more interest rate pain.
The Bank of England's move to support the bond market had triggered a rally in financial markets on Wednesday after they were hammered in recent days by the fiscal policy of Britain's new Prime Minister Liz Truss.
Investors have worried that higher borrowing costs could tip some major economies into recession as central banks hike interest rates aggressively to tackle inflation.
Canada is a major producer of commodities, including oil, so the loonie tends to be sensitive to shifts in investor sentiment.
The Canadian dollar was down 0.5% at 1.3668 to the greenback, or 73.16 U.S. cents, after trading in a range of 1.3606 to 1.3755. On Wednesday, the currency touched its weakest intraday level since May 2020 at 1.3832.
U.S. crude prices were up 0.6% at $82.65 a barrel on indications that OPEC+ might cut output, while Canadian economic activity edged up 0.1% in July, compared to estimates of a 0.1% decline.
The increase was driven by strong oil sand production, Statistics Canada data showed. A preliminary estimate showed gross domestic product was flat in August.
Canadian government bond yields were higher across the curve, tracking the move in U.S. Treasuries. The 10-year rose 7.6 basis points to 3.163%.
(Reporting by Fergal Smith; Editing by Nick Zieminski)
