TORONTO, June 16 (Reuters) – The Canadian dollar strengthened to a nine-month high against its U.S. counterpart on Friday as oil prices rose and investors recalibrated bets on the peak level of interest rates this cycle from the Bank of Canada and the Federal Reserve.
The loonie was trading 0.2% higher at 1.3195 per greenback, or 75.79 U.S. cents, after touching its strongest intraday level since September at 1.3189. For the week, it was up 1.1%, its third straight week of gains.
“There seems to be a greater degree of uncertainty with respect to the two terminal rates and that seems to be a pretty significant driver for the Canadian dollar at this point,” said Bipan Rai, global head of FX strategy at CIBC Capital Markets.
The Fed on Wednesday forecast two further rate hikes, which would lift its policy rate to a 5.50%-5.75% range, but money markets are pricing in just one additional move.
Meanwhile, investors expect the Canadian central bank’s benchmark rate to peak at about 5.10% this year, up 32 basis points from the beginning of June. Last week, the BoC tightened by 25 basis points to 4.75%, its first move since January.
“We are just probing below support (for USD-CAD) at the 1.3220 area,” Rai said. “I think if we can get a weekly close below 1.32 that’s quite meaningful and that potentially sets us up for a run towards the 1.30 area over the coming weeks.”
Higher oil prices, on Chinese demand and OPEC+ supply cuts, added support for the loonie. U.S. crude oil futures were up 0.4% at $70.92 a barrel.
Canadian government bond yields rose across the curve, tracking moves in U.S. Treasuries. The 10-year was up 3.8 basis points at 3.372%.
Reporting by Fergal Smith; Editing by Richard Chang
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