The Canadian dollar climbed to a near 11-month high against its US counterpart after the Bank of Canada’s first rate hike in seven years and on the premise that more are to come.
While the interest rate increase was widely expected what was surprising was just how hawkish the central bank was. In a statement made after the rate hike was announced, the members hinted that there would be another rate hike by December, although emphasised that future decisions would be dictated by economic data.
The bank raised interest rates by 25 basis points, from 0.50% to 0.75%, citing an improving economy as the driver. There is an 80% chance that there will be a further tightening of monetary policy by the end of the year.
Analysts were expecting a more dovish rhetoric from the central bank so the loonie got a nice boost. The last time the Canadian dollar was so high was in August 2016.
The Canadian dollar as soared 5% since the bank announced the interest rate decision in June.