The Canadian dollar strengthened to a near one-week high against its U.S. counterpart on Monday as the greenback posted broad-based declines and domestic data showed inflation accelerating in December.
The loonie was trading 0.4% higher at 1.3865 per U.S. dollar, or 72.12 U.S. cents, after touching its strongest intraday level since last Tuesday at 1.3860.
The U.S. dollar fell against a basket of major currencies as investors flocked to safe havens like the Swiss franc, after U.S. President Donald Trump’s latest tariff threats against Europe over Greenland sparked a broad risk-averse move across markets.
Consumer prices in Canada rose 2.4% year-over-year last month, largely due to the base effect of the previous year’s sales tax break, but closely watched core measures of inflation cooled for the third consecutive month. Analysts polled by Reuters had forecast inflation would hold at November’s 2.2% rate.
“I think the headline is what matters right now,” said Adam Button, chief currency analyst at investingLive. “The Bank of Canada will be looking for reasons to stay on the sidelines or hike rates.”
Investors expect the Bank of Canada to leave its benchmark interest rate on hold at a three-year low of 2.25% next week but are pricing in a roughly 40% chance of a hike by year-end, swap market data showed.
A fourth-quarter survey by the central bank showed that Canadian business sentiment remains subdued amid trade tensions with the United States, and firms only expect modest sales growth in the year ahead.
The price of oil, one of Canada’s major exports, was up 0.2% at $59.57 a barrel as civil unrest in Iran subsided.
Canadian bond yields were mixed across a steeper curve. The 2-year was down 1.1 basis points at 2.538%, while the 10-year was up 0.7 basis points at 3.391%.
