- Bank of Canada keeps its interest-rate target unchanged
- Alberta oil fires crimp output as prices near $50 a barrel
The Canadian dollar strengthened from near a seven-week low after the nation’s central bank held its interest-rate target unchanged and said economic growth would rebound next quarter.
The loonie gained as the Bank of Canada kept its benchmark interest rate at 0.5 percent, matching forecasts in a Bloomberg survey. Policy makers lowered their expectations for growth in the three months through June due to wildfires that have raged in Alberta, but said growth will return as oil production resumes. Crude prices rose to almost $50 a barrel.
Canada’s currency has slumped as Federal Reserve officials move to increase U.S. interest rates, alleviating the pressure on policy makers over the border to lower theirs. A weak loonie is needed to support economic growth, which has suffered from the slide in oil, a major export. Forecasters see the currency trading at C$1.32 by year-end, less than 1 percent weaker, according to median estimates compiled by Bloomberg News.
The central bank was “perhaps not as dovish as the market had expected,” said Shaun Osborne, chief foreign-exchange strategist at Bank of Nova Scotia in Toronto. “The concession to weaker second quarter gross domestic product was no real surprise, but they seem confident in a third-quarter rebound. So we’re seeing a minor relief rally for the Canadian dollar,” he said, adding that yield differentials will limit further gains.
The loonie gained 0.4 percent to C$1.3075 per U.S. dollar as of 11:33 a.m. in Toronto. The loonie declined the past three weeks, its longest streak of losses since January, after touching a 10-month high earlier in May.
Crude oil futures added 1.8 percent to $49.50 a barrel in New York, reaching the highest level since October.
Hedge funds and other large speculators boosted bets on Canadian dollar gains to the highest since 2013 earlier this month, data from the Commodity Futures Trading Commission show.