By Fergal Smith
TORONTO (Reuters) - The Canadian dollar was little changed against its broadly stronger U.S. counterpart on Wednesday as data showed Canada's economy shrinking less than expected in April, but the currency posted its biggest monthly decline since March of last year.
The loonie was nearly unchanged at 1.2400 to the greenback, or 80.65 U.S. cents. Earlier, it touched its weakest level since June 21 at 1.2423.
For the month, the loonie was down 2.7% as a hawkish shift in guidance by the Federal Reserve boosted the U.S. dollar. The safe-haven greenback rallied against a basket of major currencies as concern rose over the spread of the Delta coronavirus variant.
Canadian GDP fell 0.3% in April as businesses were shut down during the COVID-19 pandemic, beating analyst forecasts of a 0.8% decline, Statistics Canada data showed.
A preliminary estimate showed that the economy weakened a further 0.3% in May. Some provinces waited until June to ease restrictions.
"April and May were likely temporary setbacks to the recovery," said Sri Thanabalasingam, senior economist at TD Economics. "Reopening across the country, falling cases and hospitalizations, and an extraordinary vaccine rollout, should lead to a rapid bounce back in economic activity."
Despite the June decline, the Canadian dollar is up 2.7% since the beginning of 2021, the biggest gain among G10 currencies. It has been helped by higher commodity prices.
The price of oil, one of Canada's major exports, rose after industry data suggested U.S. crude stockpiles were shrinking. U.S. crude oil futures settled 0.7% higher at $73.47 a barrel.
Canadian government bond yields eased across a flatter curve, tracking the move in U.S. Treasuries.
The 10-year was down 2.9 basis points at 1.388%, with the bond market closing early ahead of the Canada Day holiday on Thursday.
(Reporting by Fergal Smith; Editing by Andrea Ricci and Nick Zieminski)