The Canadian dollar edged higher against its U.S. counterpart on Tuesday as investors shifted attention to central banks other than the Federal Reserve that are embracing a more hawkish stance.
The Canadian dollar was trading 0.2% higher at 1.2685 to the U.S. dollar, or 78.83 U.S. cents, adding to its previous day’s gains. It traded in a range of 1.2656 to 1.2726.
“The big driver in the market is the realization that the Fed isn’t the only central bank turning off the stimulus taps in this cycle,” said Tony Valente, senior FX dealer at AscendantFX.
Money markets expect the Bank of England to hike interest rates for the second time in less than two months on Thursday, while the Bank of Canada is expected to hike in March and six times in total this year.
The U.S. dollar fell for a second day against a basket of major currencies after hitting a 19-month peak at the end of last week. It was pressured by weaker-than-expected U.S. economic data and Fed officials pushing back against aggressive rate hikes this year.
Those reassurances helped underpin riskier assets, with world stocks rising after a volatile January.
The price of oil, one of Canada’s major exports, held near a seven-year high despite speculation that OPEC+ could go further than expected to add supply at a meeting this week. U.S. crude prices settled 0.1% higher at $88.20 a barrel.
The Canadian economy grew 0.6% in November from the previous month, beating expectations for a gain of 0.3%, while a preliminary estimate showed fourth-quarter GDP increasing at an annualized rate of 6.3%.
Canadian government bond yields rose across a steeper curve, with the 10-year up 3.4 basis points at 1.804%.
(Reporting by Fergal Smith; Editing by Marguerita Choy)
