Canadian dollar reaches nearly four-week high on BoC rate hike bets
TLT•The Canadian dollar rose 0.3% to 1.4095 per US dollar, after reaching its strongest level since September 23, as markets priced in an 80% chance of a Bank of Canada rate hike on October 28, up from 30% on Friday.
1. Rate hike bets rise
The Canadian dollar held on to gains after Bank of Canada Governor Tiff Macklem said the central bank expects to raise its quarterly inflation forecast significantly this month because of persistently high crude oil and petroleum product prices. The loonie rose 0.3% to 1.4095 per US dollar, or 70.95 US cents, after touching 1.4071.
2. Inflation and bond yields
Canada’s annual inflation rate rose to 3.1% in September from 3% in August, below analysts’ 3.2% forecast. Canadian bond yields rose across the curve, with the 10-year yield up 11.1 basis points to 3.940%.
3. Alberta referendum ahead
Investors also awaited the outcome of a nonbinding referendum on whether Alberta should secede from Canada. The currency market would welcome an emphatic rejection of separation by voters, said Adam Button, chief currency analyst at investingLive.
