The Canadian dollar strengthened sharply against its US counterpart on Wednesday after the Bank of Canada announced it would cut monthly bond purchases and saw a faster path to a possible interest rate hike.
In a statement following its policy meeting, the central bank left interest rates unchanged, but said it would cut its net weekly bond purchases by C $ 4 billion (3.2 billion dollars) to 3 billion Canadian dollars as of April 26. being added each week reflects progress in economic recovery, ”said the BOC.
The US dollar fell 1.1% to reach 1.2481 Canadian dollars USDCAD,
The US dollar is down 1.9% against the Canadian dollar, often referred to as the “loonie,” so far this year. The US dollar was little moved against other major rivals, with the ICE US Dollar Index, a measure of the currency against major rivals, down 0.1%.
Canadian bonds sold off on the announcement, pushing the country’s 10-year government bond yield up 6 basis points to 1.56%. Yields rise as bond prices fall. US Treasuries saw little movement, with the BX 10-year yield: TMUBMUSD10Y
remaining around 1.3 basis points higher at 1.57%.
The “slight central bank tightening, if you can call it that, is fully justified by recent data which shows the job market is recovering and the economy is expected to grow by more than 5% over the year.” year, ”said Michael Hewson, chief market analyst. to CMC Markets, in a note.
The bank said it remains committed to keeping its interest rate at the effective lower limit until the economic downturn is absorbed to help achieve the 2% inflation target on a sustainable basis.
Based on the bank’s latest projection, policymakers said it should now happen in the second half of 2022. Previously, the bank said it doesn’t expect this to happen until 2023. .