Canadian Dollar Rebounds as Inflation Fears Rise

The Canadian dollar rebounded on Wednesday from its three-week low against the US dollar after investors increased their bets on a potential interest-rate hike by the Bank of Canada later this year.

The loonie rose 0.2% to C$1.3870 per US dollar, equivalent to 72.10 US cents, following the central bank's warning about rising inflation risks.

Avery Shenfeld, chief economist at CIBC Capital Markets, noted that markets are assigning greater weight to inflation concerns than economic growth uncertainty, which has strengthened expectations for tighter monetary policy.

The market pricing now implies a 75% probability of at least one Bank of Canada rate increase this year, up from 64% before the central bank's latest announcement.