Bank of Canada strengthened the Canadian dollar with a rate hike
2022.12.07 11:49
Bank of Canada strengthened the Canadian dollar with a rate hike
Budrigannews.com – Markets priced in a slightly higher endpoint for interest rate hikes following the Bank of Canada’s latest oversized policy move, which resulted in the Canadian dollar strengthening against its counterpart in the United States on Wednesday. The Canadian dollar had fallen from a one-month low earlier in the day.
The Bank of Canada (BoC) increased its benchmark overnight interest rate by 50 basis points, reaching its highest level in almost 15 years. However, the BoC eliminated the forward guidance that it had been using since March, when it began raising rates. This included language that stated that they would need to increase even further.
Darcy Briggs, a portfolio manager at Franklin Templeton Canada, stated, “It looks like markets have taken it a little more hawkish than expected, but our take is we’re in the last throes of the rate tightening cycle and moving pretty close to a hold.”
In June, money markets moved to a terminal rate of 4.43 percent, or the peak of this cycle’s interest rates, up about 7 basis points from before the policy decision.
The Canadian dollar was exchanging 0.4% higher at 1.36 to the greenback, or 73.53 U.S. pennies, in the wake of contacting its most vulnerable level since Nov. 4 at 1.3699.
According to a Reuters poll, major commodity consumer China loosens its COVID-19 restrictions, potentially bringing an end to the Federal Reserve’s campaign to raise interest rates, and the currency will appreciate over the next year.
Since the pandemic began three years ago, China’s resolute anti-COVID policy has undergone the most significant adjustments since then.
Despite this, fears of a recession weighed on the price of oil, one of Canada’s major exports, which was down 0.4 percent to $73.93 per barrel.
The yields on Canadian government bonds increased on a curve that was more deeply inverted.
After reaching its lowest level since August 16 at 2.715%, the 10-year bond was up 3.2 basis points to 2.808%.
