Canadian Dollar Rebounds as Wall Street Recovers, BoC Signals Further Tightening

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  • The Canadian dollar appreciates 0.1% against the greenback
  • Currency rebounds from its lowest since July 14
  • Bank of Canada raises rates by 75 basis points
  • Canadian bond yields dip on a flatter curve

TORONTO, Sept 7 (Reuters) – The Canadian dollar edged higher against its U.S. counterpart on Wednesday, with the currency rebounding from its lowest level in nearly eight weeks as investor confidence picked up and the Bank of Canada raised 14-year interest rates. high.

The loonie was trading up 0.1% at 1.3135 against the greenback, or 76.13 US cents, after hitting its lowest since July 14 at 1.3208.

“We are seeing a strong rebound in the Canadian dollar today, not so much because of the Bank of Canada’s expected 75 basis point rate hike, but because of the widespread selling of the US dollar amid constructive risk,” said Erik Bregar. , Director, Foreign Exchange and Precious Metals Risk Management at Silver Gold Bull.

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US stock indices climbed following a recent selloff as bond yields eased. In contrast, the price of oil fell to its lowest level since Russia invaded Ukraine on February 24, settling down 5.7% to $81.94 a barrel. Read more

Oil is one of Canada’s main exports.

The Bank of Canada raised its benchmark rate by three-quarters of a percentage point to 3.25%, as expected, and signaled that its most aggressive tightening campaign in decades was not yet over as it struggling to control inflation. Read more

Money markets expect around 50 basis points of additional tightening by the end of 2022. .

“It feels like the bank is preparing the market for the possibility that rates will have to keep rising for more than one or two meetings,” said Andrew Kelvin, chief strategist for Canada at TD Securities.

Canadian bond yields eased on a flatter curve, following the performance of US Treasuries. The 10-year fell 7.7 basis points to 3.122%, after hitting its highest intraday level in nearly two months at 3.244% on Tuesday.

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Reporting by Fergal Smith Editing by Marguerita Choy and Paul Simao

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