The Canadian dollar CADUSD weakened to its lowest level in more than seven weeks against its U.S. counterpart on Thursday as broader gains for the greenback offset hawkish comments by Bank of Canada Governor Tiff Macklem.
The U.S. dollar surged to its highest levels in two decades against a basket of major currencies, propelled by widespread weakness in its major rivals, such as the yen and the euro .
The price of oil, one of Canada’s major exports, edged lower as investors weighed up tightening Russian supplies and the prospect of dwindling fuel demand in China.
U.S. crude oil futures dipped 0.3 per cent to $101.67 a barrel, while the Canadian dollar was trading 0.4 per cent lower at 1.2867 to the greenback, or 77.72 U.S. cents. It touched its weakest since March 9 at 1.2879.
Still, only the Swedish crown posted a smaller decline among G10 currencies.
Canada’s economy is overheating, creating domestic inflationary pressures, and higher interest rates are needed to cool things down, Macklem told a Senate committee on Wednesday.
Money markets are pricing in half-percentage-point hikes by Canada’s central bank at each of its next two policy decisions, which would lift the benchmark rate to 2 per cent. The BoC estimates that the range between 2 per cent and 3 per cent is a neutral setting for Canada’s economy, neither stimulating nor weighing on activity.
Canadian payroll employment rose by 142,900 in February, paced by gains in the services-producing sector, data from Statistics Canada showed.
Ontario, Canada’s most populous province, is due to table its budget on Thursday, with economists expecting more economic stimulus ahead of a likely June 2 election.
Canadian government bond yields were higher across the curve, tracking the move in U.S. Treasuries. The 10-year was up 4.6 basis points at 2.846 per cent, after touching last Thursday its highest in nearly 11 years at 2.944 per cent.
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