The Canadian dollar climbed to the strongest level in a week after an inflation gauge increased in June for a second month past the central bank’s 2 percent target.
The currency gained versus most of its 16 peers after the consumer price index rose 2.4 percent from a year earlier, the fastest in more than two years, the government reported. The data came two days after Bank of Canada Governor Stephen Poloz said gains in inflation are temporary.
“Maybe he was wrong on that,” Blake Jespersen, managing director of foreign exchange in Toronto at Bank of Montreal, said in a phone interview. Poloz “seems really confident that inflation is not going to persist at these levels. I guess we will have to see whether he was right or not.”
The loonie, as the Canadian dollar is known for the image of the aquatic bid on the C$1 coin, appreciated 0.3 percent to C$1.0729 per U.S. dollar at 8:45 a.m. in Toronto. It touched C$1.0709, the strongest level since July 11.
The CPI increased 2.3 percent in May after reaching 2 percent in April for the first time in two years.
The core rate, which excludes eight volatile products, increased 1.8 percent in June after a gain of 1.7 percent the prior month, Statistics Canada said today from Ottawa.
Poloz kept his key lending at 1 percent two days ago and said faster inflation this year will be led by temporary gains in energy and import costs. The central bank also said prices will be restrained by slack in the economy over the next two years and that policy makers are “neutral” on their next interest-rate move.