Canadian dollar bounces back as market rethinks Fed’s downside risk

The loonie, which has benefited from the surge in commodity prices in recent months, was trading 0.7% higher at 1.2052 against the greenback at 82.97 cents US, returning to the height of the most Wednesday’s three-year high at 1,2013.

The US dollar lost ground against a basket of major currencies, sitting just above a multi-month low. On Wednesday, it had recovered after several policymakers at the US Federal Reserve, minutes before the Fed’s last monetary policy meeting, said a discussion on reducing the pace of asset purchases would be appropriate. ” at one point”.

“The forex market appears to have overreacted to the hint of the downside, as policy is unlikely to change until the Fed sees months of additional data and until further substantial economic progress is made. be achieved, “said Ronald Simpson, managing director of global currency analysis at Action Economics.

In contrast, last month the Bank of Canada slashed the pace of its bond purchases, becoming the first major central bank to cut back on money printing stimulus programs during a pandemic.

On Thursday, the BoC said the Canadian real estate market and high levels of household debt had made the economy more vulnerable to economic shocks, but said it would not raise interest rates to quell the frenzy .

Canada added 351,300 jobs in April, the third consecutive month of increases, according to a report by payroll service provider ADP.

The price of oil, one of Canada’s top exports, fell 2.1% to $ 62.05 a barrel, after diplomats said progress was made on a deal to lift sanctions against Iran.

Canadian government bond yields eased on a flatter curve alongside those of US Treasuries. The 10-year was down 3.3 basis points to 1.545%.

(Reporting by Fergal Smith; editing by Jonathan Oatis)

By Fergal Smith

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