By Fergal Smith
TORONTO (Reuters) - The Canadian dollar weakened against its U.S. counterpart on Thursday as oil prices fell and Bank of Canada Governor Tiff Macklem stopped short of endorsing the market's recent move to price in another interest rate hike by the central bank.
The loonie was trading 0.5% lower at 1.3520 to the greenback, or 73.96 U.S. cents, after moving in a range of 1.3450 to 1.3524.
Macklem suggested April's inflation increase - the first in 10 months - was an anomaly and said consumer prices would continue to come down, in comments following the release of the BoC's financial system report.
"I think this is one of those platforms where it probably wasn't appropriate to talk about policy ... I don't get a sense that he wanted to provide much by way of new information at all," said Ian Pollick, global head, FICC strategy at CIBC Capital Markets.
"Markets have moved a lot over the past 48 hours, so there is some sensitivity just in the sense that they were looking for some validation and it was never going to be forthcoming today."
Money markets see a roughly 60% chance of the central bank resuming interest rate hikes by July, down from 80% before Macklem spoke.
As recently as Tuesday, before the release of the April inflation data, the market had been leaning toward the next move being a rate cut.
The price of oil, one of Canada's major exports, was trading 1.7% lower at $71.59 a barrel as the U.S. dollar rallied against a basket of major currencies.
The Canadian government bond yields rose across a steeper curve as U.S. Treasury yields climbed. The 10-year touched its highest level since March 9 at 3.219% before dipping to 3.172%, up 6.7 basis points on the day.
(Reporting by Fergal Smith; Editing by Alistair Bell)