The Canadian dollar touched its strongest level in November after consumer prices grew faster than expected, fuelling speculation the central bank may raise interest rates soon.
The currency, which is also known as the loonie, rose 0.6 percent to trade at C$1.1241 per U.S. dollar as of 12:06 p.m. Toronto time. It rose to C$1.1192, its highest level since Oct. 31 and advanced up to 1 percent, the strongest gain since Oct. 6. One loonie is equivalent to 88.96 U.S. cents.
“This is an input to the Bank of Canada potentially hiking rates,” Jack Spitz, a Montreal-based managing director of foreign exchange at National Bank of Canada, told Bloomberg News. “It does suggest there is some inflation potentially coming forward and as a result of that the Bank of Canada may take less of a dovish view going forward.”
Canada’s inflation as measured by the consumer price index surged 2.4 percent in the year through November, up from 2 percent in September, reported Statistics Canada. Core inflation rate, which is adjusted for a few volatile items, rose to 2.3 percent, the quickest pace since February 2012.
The Bank of Canada is due to meet on Dec. 3 to debate on monetary policy, having in its last meeting fixed the interest rate at 1 percent in September.
The Canadian dollar had earlier gained along with global commodities and stocks after China lowered borrowing costs for the first time in two years. Crude oil futures also jumped up to 3 percent at $77.83 per barrel in New York. Crude is Canada’s biggest export.
The yield on Canada’s target 10-year government bond remained slightly unchanged at 2.02 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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