The Canadian dollar rallied against its broadly weaker U.S. counterpart on Wednesday as the Federal Reserve signalled no intention to raise interest rates over the next year, bolstering the outlook for the global economy.
The U.S. central bank left the benchmark overnight lending rate in its current, historically low, target range between 1.50% and 1.75%. A solid majority of 13 of 17 Fed policy-makers foresee no change in interest rates until at least 2021.
“The Fed cemented the idea that U.S. rates will not go higher,” said Adam Button, chief currency analyst at ForexLive. “That is a great sign for global growth and the Canadian dollar is among the more risk sensitive currencies.”
Canada is a major exporter of commodities, including oil, so its economy could benefit from an improved outlook for global growth.
U.S. crude oil futures pared earlier losses to settle 0.8% lower at $58.76 a barrel, while Wall Street rallied and the U.S. dollar declined against a basket of major currencies.
At 3:49 p.m. (2049 GMT), the Canadian dollar was trading 0.5% higher at 1.3169 to the greenback, or 75.94 U.S. cents. The currency touched 1.3163, its strongest intraday level since data on Friday showed Canada’s economy shed more than 70,000 jobs in November.
Gains for the loonie were restrained by the potential for Bank of Canada Governor Stephen Poloz, who is due to speak on Thursday, to react dovishly to the jobs data, Button said.
Poloz’s speech will be the first since the Bank of Canada said he would step down when his seven-year mandate expires in June. Last week, the central bank left its benchmark interest rate unchanged at 1.75% as it pointed to early signs the global economy was stabilizing.
Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries. The two-year rose 2 Canadian cents to yield 1.658% and the 10-year was up 18 Canadian cents to yield 1.580%.
Canadian industries ran at 81.7% of capacity in the third quarter of 2019, down from 83.3% in the second quarter, Statistics Canada said. Economists had forecast a rate of 82.1%.
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