The Canadian dollar strengthened to a six-week high against its U.S. counterpart on Thursday, as the greenback posted broad-based declines one day after the Federal Reserve left interest rates on hold.
The loonie was trading 0.4% higher at 1.3993 per U.S. dollar, or 71.46 U.S. cents, marking its strongest intraday level since June 17. The U.S. dollar fell against a basket of major currencies as potential currency intervention by Tokyo boosted the yen . The Fed’s policy decision on Wednesday also bruised the dollar, as traders questioned whether the U.S. central bank’s new chief was serious about containing inflation.
“Markets have already been doing some of the tightening the Fed has been unwilling to deliver,” said Sebastien Mc Mahon, chief economist at iA Financial Group. “The message from the front end (of the yield curve) is ‘low odds of a hike in September,’ while the long end is signaling that the Fed is behind the curve.”
The U.S. 30-year yield rose to its highest level since 2007 at 5.244%. The price of oil, one of Canada’s major exports, was trading 0.3% lower at $84.22 a barrel as investors considered proposed plans for a Saudi Arabia-led maritime coalition to boost defense cooperation around the Red Sea.
Domestic data showed that payroll employment increased by 24,100 positions in May, or 0.1%, following an increase of 59,000 in April.
Canadian government bond yields edged lower across the curve.
The 10-year was down 1.9 basis points at 3.578%, while it fell 6.2 basis points further below the equivalent U.S. yield to a gap of about 109 basis points, the widest since May 25.
