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Canadian dollar weakens 0.9% against greenback
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Investors raise bets on 50-basis-point hike in October
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2-year yield climbs above 4% for first time in 15 years
TORONTO, Oct 6 (Reuters) – The Canadian dollar weakened
against its U.S. counterpart on Thursday as the greenback
notched broad-based gains and despite a signal by Bank of Canada
Governor Tiff Macklem that the central bank would continue to
hike interest rates aggressively.
The loonie was down 0.9% at 1.3740 to the greenback,
or 72.78 U.S. cents, moving back in sight of last Friday’s
two-year low at 1.3838.
“It was predominantly a broad (U.S.) dollar move,” said
Bipan Rai, North America head of FX strategy at CIBC Capital
Markets.
“You read Macklem’s speech and it’s pretty hawkish. … In
particular, he pointed to the recent weakness in the Canadian
dollar and tied it a little bit more than I thought he would to
incoming policy decisions.”
The loonie has weakened 8% against the U.S. dollar since the
start of 2022. That’s a better performance than other G10
currencies except for the Swiss franc, though most of
that decline has come since mid-August.
Macklem said the currency’s recent weakness will offset some
easing of inflation pressures that could come from improving
global supply chains and lower commodity prices and made clear
the central bank will not yet be pivoting away from its current
rapid pace of interest rate increases.
Money markets raised bets on a 50-basis-point hike at the
BoC’s next policy announcement on Oct. 26, pricing in a 70%
chance of such a move versus roughly 50% before the governor’s
speech.
The U.S. dollar climbed against a basket of major
currencies and Wall Street’s main indexes fell as optimism faded
that the Federal Reserve will go easy with its rapid tightening.
Canadian government bond yields rose across a more deeply
inverted curve, with the 2-year moving above the 4%
threshold for the first time since October 2007. It was up 14.7
basis points at 4.013%.
(Reporting by Fergal Smith; Editing by Paul Simao and Jonathan
Oatis)
