Loonie Gains for Fifth Day as Bank of Canada Holds Rate TargetBy
The Canadian dollar appreciated for the fifth straight day, the longest streak since August, after the Bank of Canada kept its key interest rate unchanged and expressed confidence the nation’s economy is on the mend.
The currency appreciated versus most of its major peers as the central bank held its benchmark interest rate at 0.5 percent and delayed the time frame for a return to full economic output to mid-2018.
“Not much positive here for the Canadian dollar, but perhaps the only thing to say is that rates were not cut,” said Shaun Osborne, chief foreign-exchange strategist at Bank of Nova Scotia in Toronto. “There was no real chance of that, but markets being what they are may have taken that as a small positive.”
The loonie rose 0.4 percent percent to C$1.3052 per U.S. dollar at 10:17 a.m. in Toronto. It traded at 76.62 U.S. cents. On Tuesday, it reached the strongest level since Sept. 29. It’s the best performer among Group-of-10 peers this month.
“Given the downward revision to the growth profile and the later closing of the output gap, the Bank considers the risks around its updated inflation outlook to be roughly balanced, albeit in the context of heightened uncertainty,” policy makers led by Stephen Poloz said in a statement.
Hedge funds and other large speculators ceased to bet in favor of the loonie last month after being bullish since April, according to net-positioning data from the Commodity Futures Trading Commission. The shift came after a Sept. 23 report showed Canada’s inflation rate unexpectedly slowed to a 10-month low, boosting bets that the central bank will respond with monetary easing.
The loonie will trade at C$1.32 against its U.S. counterpart by the end of the year and strengthen to C$1.29 by the end of 2017, according to forecasts compiled by Bloomberg.