The Canadian dollar CADUSD rose to its highest level in nearly three weeks against its U.S. counterpart on Tuesday as investment sentiment continued to recover, but the move was limited ahead of a Bank of Canada (BoC) interest rate decision.
Wall Street’s main indexes moved higher for a third day as U.S. Treasury yields dropped amid growing bets of a let-up in the pace of Federal Reserve interest-rate hikes on more signs of a cooling economy.
Stocks globally have been hammered this year by the rapid pace of central bank tightening to subdue inflation.
The price of oil, one of Canada’s major exports, was lifted by a weaker U.S. dollar and supply concerns highlighted by Saudi Arabia’s energy minister. U.S. crude oil futures settled 0.9% higher at $85.32 a barrel.
“The Canadian dollar is following market sentiment today,” said Darren Richardson, chief operating officer at Richardson International Currency Exchange Inc.
“All eyes will be on the Bank of Canada tomorrow to see what their guidance is on rates.”
Money markets expect the BoC on Wednesday to raise interest rates by three-quarters of a percentage point to a 14-year high of 4% and to then tighten further over the coming months to a peak of nearly 4.50% next year.
The Canadian dollar was trading 0.7% higher at 1.3615 to the greenback, or 73.45 U.S. cents, after touching its strongest intraday level since Oct. 6 at 1.3601.
Canadian government bond yields were lower across a more deeply inverted curve, tracking the move in U.S. Treasuries.
The 10-year eased 7.3 basis points to 3.502%, after last Friday touching its highest level in nearly 14 years at 3.779%.