Traders eye BoC as possible catalyst for Canadian dollar catchup
BNN Bloomberg
Canada’s dollar has scope to make up ground against some of its biggest commodity-related peers if the country’s central bank provides an appropriate shot of hawkishness this week.
Canada’s dollar has scope to make up ground against some of its biggest commodity-related peers if the country’s central bank provides an appropriate shot of hawkishness this week.
While the currency has received some support from higher oil and resource prices in the wake of the Russia-Ukraine war, it has lagged the likes of the Australian dollar and the Norwegian krone, and some analysts reckon that the so-called loonie remains unduly weak. This Wednesday’s Bank of Canada meeting, which is widely expected to deliver a half-point interest rate hike, could well prove a catalyst for fresh moves higher.
“The Canadian dollar is still undervalued, so at some point that should adjust,” said Brad Bechtel, a strategist at Jefferies LLC. He predicts that the currency will rally as the BOC “continues to become more and more hawkish.”
The market has shown some signs of increased positivity over the past month, with the currency up close to 1 per cent against its U.S. counterpart. Short-term option skews have become less bearish for the loonie, while futures market positioning data last week showed leveraged funds shifting to their least negative stance since mid-February.
The Canadian dollar gained as much as 0.4 per cent intraday Tuesday to 1.2582 per greenback after slower than expected core U.S. consumer price inflation data.
