The so-called loonie climbed against all of its Group-of-10 peers, advancing as much as 0.7 per cent against its U.S. counterpart to $1.2937 per greenback. Short-end Canadian rates leaped after the Bank of Canada shocked traders with a 100-basis-point move in its benchmark rate, extending an earlier advance fuelled by hotter-than-anticipated U.S. inflation figures. The two-year bond yield rose as much as 19 basis points to 3.4 per cent.
The aggressive pace of tightening cements the Canadian dollar’s position as one of the best-performing major currencies right now. While the mighty greenback has climbed against almost everything this month, the Canadian dollar is up against all of its other Group-of-10 peers since the end of June.Article content
The actions of the BoC “will really help shield the loonie from further downside pressures stemming from commodity and equity benchmarks,” said Simon Harvey, an analyst at Monex Europe Ltd. The dollar-loonie pair has struggled to make inroads above 1.3, and he thinks this dynamic “will persist over the coming weeks.”
BoC boss Tiff Macklem raised the central bank’s policy rate to 2.5 per cent in a decision announced Wednesday in Ottawa that warned of more hikes to come. The 100-basis-point move is the biggest increase since 1998 and larger than the three-quarter-point move that economists and markets had been primed for.
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