The Canadian dollar CADUSD rose against its U.S. counterpart on Monday and the 10-year yield moved above 4% for the first time in nearly 16 years, as investors bet that the Federal Reserve and the Bank of Canada would stick with their hawkish stances.
The loonie was trading 0.1% higher at 1.3470 to the greenback, or 74.24 U.S. cents, after moving in a range of 1.3455 to 1.3491.
Among G10 currencies, only the Swedish crown performed better than the Canadian currency, as the U.S. dollar extended its recent gains against a basket of major currencies.
“The Fed and the Bank of Canada are presently the most hawkish central banks in the G10,” said Tony Valente, senior FX dealer at AscendantFX.
Last week, the Fed projected that monetary policy would be kept significantly tighter through 2024 than previously expected, while hotter-than-expected domestic inflation data bolstered bets on the BoC raising interest rates further.
Money markets see a roughly 50% chance of a rate hike at the BoC’s next policy decision on Oct. 23 and have fully priced in another tightening by March.
Still, speculators have raised their bearish bets on the Canadian dollar to the most since May, data from the U.S. Commodity Futures Trading Commission showed on Friday. As of Sept. 19, net short positions had increased to 48,027 contracts from 41,883 in the prior week.
The price of oil, one of Canada’s major exports, settled 0.4% lower at $89.68 a barrel as Russia relaxed its fuel export ban.
Canadian government bond yields climbed across a steeper curve, tracking moves in U.S. Treasuries. The 10-year was up 11.2 basis points at 4.026%, its first move above the 4% threshold since January 2008.