Canadian dollar extends pullback from 5-week high ahead of BoC rate decision
TLT•The Canadian dollar fell 0.3% to 1.4050 per U.S. dollar, extending its retreat from a five-week high, as oil prices fell and investors turned cautious ahead of the Bank of Canada's rate decision. Investors see roughly a 75% chance of a 25-basis-point hike to 2.50%.
1. Canadian dollar weakens
The Canadian dollar traded 0.3% lower at 1.4050 per U.S. dollar, or 71.17 U.S. cents, extending its pullback from Friday's five-week high of 1.3966. Traders were taking money off the table ahead of what one market participant called a pivotal day.
2. Rate decision ahead
Investors see roughly a 75% chance the Bank of Canada will raise its benchmark rate by 25 basis points to 2.50% on Wednesday, in a preemptive move to keep energy-led inflation from spreading through the economy. It would be the first rate hike since July 2023. The Federal Reserve is also due to announce its policy decision on Wednesday.
3. Oil and bond yields
Oil fell as traders focused on Middle East peace talks, with U.S. crude futures settling 1.8% lower at $99.90 a barrel. Canadian bond yields edged lower; the two-year yield fell nearly one basis point to 3.367%, leaving it about 137 basis points below the equivalent U.S. rate.
