weakened to a near two-week low against its U.S. counterpart on Wednesday as investors bet the Bank of Canada would cut interest rates further after it eased for the first time in more than four years.
“Based on the current economic momentum and the likelihood that population growth now likely supports aggregate supply more than demand, we think the BoC will cut rates at least once more before the Fed meets on Sept. 18, leaving CAD vulnerable to a further widening in rate differentials,” said Simon Harvey, head of FX analysis for Monex Europe and Monex Canada.
The move to lower rates came despite data showing that the Canadian services economy grew in May for the first time in a year as firms saw an increase in new business and hired workers at a faster pace. Canadian government bond yields fell across the curve. The 10-year was down 5.7 basis points at 3.393 per cent, trading at its lowest level since March 12.