The Canadian dollar CADUSD steadied near a four-and-a-half-month high against its U.S. counterpart on Wednesday as long-term borrowing costs declined and investors weighed prospects of a recovery in the domestic housing market.
The loonie was trading nearly unchanged at 1.3330 to the greenback, or 75.02 U.S. cents, after touching its strongest intraday level since Aug. 2 at 1.3312.
“The Canadian dollar certainly has some momentum right now,” said Adam Button, chief currency analyst at ForexLive.
“The main risk for the Canadian dollar for the last year has been housing and with immigration surging and interest rates destined to come down, the possibility of a disorderly housing market is beginning to look remote.”
Minutes from the Bank of Canada’s latest meeting showed that policymakers spent considerable time discussing the chances that shelter prices could remain elevated and make it harder to return to the bank’s overall 2% inflation target.
Data on Tuesday showed that Canada’s population grew 1.1% in the third quarter, the highest rate since 1957.
Recent gains for the loonie have come as investors bet that central banks would cut interest rates next year, improving the outlook for the global economy.
“Optimism is in the air and the Canadian dollar is benefiting. You can see it throughout markets,” Button said.
Canadian government bond yields fell across the curve, tracking moves in U.S. Treasuries. The 10-year was down 6 basis points at 3.082%, after earlier touching its lowest since May 17 at 3.06%.
The price of oil, one of Canada’s major exports, settled 0.4% higher at $74.22 a barrel as investors worried about global trade disruption and tensions in the Middle East.