The Canadian dollar CADUSD strengthened against its U.S. counterpart on Wednesday but lost ground against all the other G10 currencies as the Bank of Canada raised interest rates less than investors expected.
The loonie was trading 0.3% higher at 1.3565 to the greenback, or 73.72 U.S. cents, the smallest advance among a group of ten of the worlds’ most liquid currencies.
It touched its strongest intraday level since Oct. 5 at 1.3509.
“The Canadian dollar is pretty impressive given the surprise from the Bank of Canada and the more dour (economic) outlook,” said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC.
The currency’s gain partly reflects that more investors are betting that the U.S. dollar has peaked, Chandler said.
The BoC increased its benchmark rate by half a percentage point to 3.75%, coming up short on calls for another 75 basis-points move, as it forecast the economy would stall over the next three quarters.
The U.S. dollar tumbled against a basket of major currencies after poor U.S. economic data reinforced speculation that the Federal Reserve will slow its interest rate hikes.
Higher oil prices added to support for the loonie, with U.S. crude oil futures settling 3% higher at $87.91 a barrel.
Canadian government bond yields tumbled across the curve.
The 2-year note touched its lowest since Oct. 5 at 3.869% before recovering slightly to 3.889%, down 27.4 basis points on the day. The 10-year was down 18.9 basis points at 3.301%.