The Canadian dollar reached the strongest level in almost three months as minutes from the Federal Reserve’s last policy meeting suggested the Bank of Canada may keep pace with its U.S. counterpart in raising interest rates.
The currency strengthened for a fourth day after minutes of the U.S. Federal Open Market Committee’s March 18-19 meeting showed several officials said projections for an interest-rate increase were overstated. Canadian economic data have beaten forecasts this month, while U.S. reports have trailed projections, damping speculation the U.S. central bank would move faster to raise interest rates and boost the value of its currency against Canada’s.
“Sentiment reached an extreme in that positions were overly negative, and you’ve had a bit better data in the last few weeks,” said David Doyle, a strategist at Macquarie Capital Markets, by phone from Toronto. “The FOMC minutes have largely been interpreted as signaling rate hikes could be further out.”
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, appreciated as much as 0.6 percent to C$1.0858 per U.S. dollar, the strongest level since Jan. 13. It traded at C$1.0884 per U.S. dollar at 4:41 p.m. Toronto time, up 0.4 percent. One loonie buys 91.88 U.S. cents.
The Canadian currency sank to a 4 1/2 year low of C$1.1279 on March 20, two days after Bank of Canada Governor Stephen Poloz said he couldn’t rule out interest-rate cuts.
A day after Poloz’ statement, Fed policy makers increased interest-rate forecasts.