Possible Increase In Rate By Bank Of Canada Pulls Canadian Dollar Down
Stephen Poloz, the governor of the Bank of Canada’s comments on Tuesday supports the view that the central bank could raise interest rates sooner than previously thought as the Canadian dollar strengthened to a two-month high against its U.S. counterpart.
The economy seems to be gathering momentum as a result of the cuts made by the Bank of Canada on their interest rates on 2015.
An economist at CIBC Capital Markets, Nick Exarhos said: “Poloz today signaled that rates won’t be on hold forever”.
There are 72 per cent chances for an interest rate increase, a surge from just 22 per cent before stronger-than-expected jobs data on Friday from the overnight index swaps shows.
The Bank of Canada senior deputy governor, Carolyn Wilkins made hawkish comments on Monday that lead to decision of interest rate hike.
Data from the Commodity Futures Trading Commission and Reuters calculations showed on Friday that Bearish bets on the loonie had held near a record high as of June 6.
At 9:32a.m ET, the Canadian dollar was trading at 75.60 U.S. cents, up 0.7 per cent. The currency’s weakest level was C$1.3325, while it touched its strongest since April 13 at C$1.3226.
After OPEC reported an increase in its production for May, one of Canada’s major exports: oil, edged down in their prices leading to gains in the loonie.
U.S. crude prices were down 0.22 per cent at $45.98 a barrel.
The U.S. dollar went down as traders covert the start of a two-day Federal Reserve meeting.
Canadian government bond prices were much lower across the yield curve, with the two-year down 12.5 Canadian cents to yield 0.9111 per cent and the 10-year falling 58 Canadian cents to yield 1.549 per cent.
The 2-year yield touched its highest intraday since January 2015 at 0.914 per cent.