TORONTO - U.S. Federal Reserve Chair Janet Yellen's stay-the-course strategy continues rippling through the currency market.

The Canadian dollar weakened on Thursday against its U.S. counterpart as oil prices fell, but pared some losses after domestic data showed much stronger-than-expected growth in wholesale trade. The loonie was trading at 81.05 U.S. cents as of the market close on Thursday, a decline of 0.07 from 24 hours earlier. 

On Wednesday, the loonie hit a 2-week low after the Federal Reserve signaled that it expected to raise interest rates once more by year-end. The dollar was trading at 81.12 U.S. cents as of Wednesday's market close.

The 1.5 per cent increase in July wholesale trade exceeded economists' forecasts for a decline of 0.9 per cent and was the biggest increase since January, data from Statistics Canada showed. Stripping out the effects of price changes, volumes were even stronger, up 2.1 per cent.

The strength of the data has boosted the outlook for growth in the economy for the month, offsetting soft manufacturing data, Nick Exarhos, an economist at CIBC Capital Markets, said in a research note.

Economists will turn to Canada's retail sales report, due on Friday, for further clues on prospects for July gross domestic product. The country's August inflation report is also due on Friday.

Prices of oil were largely flat on Thursday. U.S. crude futures dipped 14 cents, or 0.3 per cent, to settle at US$50.55 a barrel. Brent crude futures rose 14 cents, or 0.3 per cent, to end at US$56.43 a barrel.

Mexico and Canada will survive current talks with the United States on trade relatively unscathed, according to a Reuters poll of economists, suggesting U.S. President Donald Trump's protectionist threats still have more bark than bite. However, Trump ratcheted up his offensive on North Korea on Thursday by promising new economic sanctions.

Canadian government bond prices were little changed across the yield curve, with the two-year up 0.5 cent to yield 1.578 per cent and the 10-year rising 2 cents to yield 2.103 per cent.

The 10-year yield hovered below a nearly three-year high of 2.119 per cent reached earlier this week.

Still, global investors are warming up to Canadian bonds and their newly attractive yields, saying there is a limit to how much the Bank of Canada can diverge from its peers after its two interest rate hikes this year.

- With files from BNN.ca