Investing.com - The Canadian dollar pared back losses against the U.S. dollar on Wednesday, to trade close to five-week highs after official data showed that Canadian consumer prices rose more-than-forecast last month.
USD/CAD retreated from 1.0194, the session high, to trade at 1.0166 during early trade, up just 0.05% for the day.
The pair was likely to find support at 1.0108, the low of February 20 and resistance at 1.0194, the session high.
Statistics Canada said that consumer price inflation rose by a seasonally adjusted 1.2% in February, after a 0.1% increase in January.
Analysts had expected Canadian CPI to rise 1.0% last month.
Canadian CPI rose also rose 1.2% year-on-year, from 0.5% in January, compared to expectations for a 1.0% increase.
Core CPI, which excludes the eight major components, rose 0.7%, outstripping expectations for a 0.3% increase, after rising by 0.1% in January.
However, demand for the safe haven greenback continued to be underpinned by growing doubts over prospects for forming a new government in Italy.
Market focus moved back to Italy from Cyprus following media reports that Pier Luigi Bersani, the head of Italy's center-left alliance, ruled out forming a coalition government, saying that only an "insane person" would want to govern the country.
Investors also remained concerned that the bailout deal for Cyprus reached earlier in the week could set a precedent for future bailouts in larger euro zone states, with big bank depositors and senior bond holders forced to suffer losses.
The loonie, as the Canadian dollar is also known, was higher against the euro, with EUR/CAD dropping 0.61% to 1.2988.
The U.S was to release private sector data on pending home sales later in the trading day.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
