Market News

Canadian dollar consolidates recent gains ahead of BoC decision - REUTERS

JUNE 06, 2023

BY  Fergal Smith

TORONTO (Reuters) -The Canadian dollar edged lower against the greenback on Monday, but held on to much of its recent gains as oil prices rose and investors assessed prospects of the Bank of Canada resuming its interest rate hiking campaign this week.

The loonie was trading 0.1% lower at C$1.3435 to the greenback, or 74.43 U.S. cents, after trading in a range of 1.3418 to 1.3461. On Friday, it touched its strongest intraday level since May 16 at 1.3405.

"It feels like we are more or less consolidating here, at least until the Bank of Canada (decision)," said Bipan Rai, global head of FX strategy at CIBC Capital Markets.

The BoC became the first major global central bank to pause its rate-hike campaign in January, but the economy's surprisingly strong performance since then will test Governor Tiff Macklem's resolve to stay on the sidelines at a policy announcement on Wednesday.

Money markets see a roughly 45% chance of the central bank raising rates.

Reduced economic uncertainty after the passing of a bill to lift the U.S. debt ceiling and Saudi Arabia's pledge to cut oil production have provided support for the Canadian dollar, Rai said.

Oil is one of Canada's major exports. U.S. crude oil futures settled 0.6% higher at $72.15 a barrel.

Canadian government bond yields rose across the curve. The 2-year touched its highest intraday level since October 2007 at 4.371% before dipping to 4.340%, up 3.2 basis points on the day.

(Reporting by Fergal SmithEditing by Marguerita Choy)


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