Canadian Dollar Surges on Hawkish BoC Message and Weaker US Dollar
The Canadian Dollar has continued its recent surge, reaching its lowest level in over a week against the US Dollar. The USD/CAD pair trades around 1.3785 after falling for two consecutive days.
The weakness of the US Dollar is attributed to broad selling pressure, with the Japanese Yen experiencing a sharp rally that's spilled over into the wider currency market. Dovish comments from Federal Reserve Governor Christopher Waller have added to the Greenback's decline, while US Treasury yields have retreated from recent highs.
The Bank of Canada's (BoC) hawkish message at its September policy meeting has also supported the Canadian Dollar. Analysts at Brown Brothers Harriman note that the BoC kept the policy rate at 2.25% for a seventh consecutive meeting but warned that 'the upside risks to inflation have increased.'
As a result, markets have brought forward expectations of a first 25bps hike from January to December and firmed up odds of 75 to 100bps of tightening over the next twelve months.