Canadian dollar notches its biggest monthly advance this year

Canadian dollar notches its biggest 
monthly advance this year


THE Canadian dollar held on to much of its monthly gain against its US counterpart on Friday (Aug 30) as investors bet the global economy would avoid recession and Canadian gross domestic product data did little to alter expectations for Bank of Canada (BOC) interest rate cuts.

The loonie was trading 0.1 per cent lower at 1.35 to the US dollar, or 74.07 US cents, as the greenback clawed back some recent declines against a basket of major currencies. Still, the Canadian currency was up 2.3 per cent for the month, its biggest monthly gain since December.

The move was driven by broad-based weakness in the US dollar, said Erik Nelson, a macro strategist at Wells Fargo Securities in London.

“It tracks with widespread pricing of a global ‘soft landing’ with inflation receding, growth expectations and risk assets still elevated and central banks firmly on the path to lower rates,” Nelson said.

Canada’s economy grew at an annualised rate of 2.1 per cent in the second quarter, beating estimates for a gain of 1.6 per cent. Still, the mix of growth, which was led by government expenditures, failed to impress some economists, while monthly data showed activity stalling in June and likely again in July.

The BOC will cut its benchmark rate by 25 basis points for a third straight meeting on Sep 4 and again in October and December, faster reductions in borrowing costs than previously thought, according to a majority of economists canvassed in a Reuters poll.

Canadian government bond yields moved higher across the curve, tracking moves in US Treasuries. The 10-year was up 2.6 basis points at 3.160 per cent, its highest level since Aug 8. REUTERS



Source link

Advertisement - Continue Reading Below

Advertisement - Continue Reading Below