The Canadian dollar strengthened on Thursday, coming off six-week lows against its U.S. counterpart after Bank of Canada Governor Stephen Poloz said he believed current monetary conditions were appropriate.
In remarks at a fireside chat organized by the Ontario Securities Commission in Toronto, the central banker said he thought the central bank’s policy fit the country’s economic situation. Poloz’s remarks come after BoC Senior Deputy Governor Carolyn Wilkins on Tuesday said the global economy was facing immense challenges that could spill over into Canada and that the central bank had room to move interest rates lower.
Currency markets reacted by pushing the loonie to six-week lows in the days following. The Canadian dollar was at 75.35 US cents, 0.26 per cent stronger than Wednesday’s close at 75.18.
But trading was range bound, with the loonie still about half a per cent off of where it had opened Tuesday prior to Wilkins’ comments.
Canada’s central bank shifted to a more dovish stance in October as it cut its economic growth forecasts and expressed concern about global trade risks.
China will strive to reach an initial trade agreement with the United States as both sides keep communication channels open, the Chinese commerce ministry said on Thursday, in an attempt to allay fears talks might be unraveling.
Reports on Wednesday that the two countries were unlikely to reach a “phase one” trade deal by the end of the year had spurred a risk-off trade, bolstering the Japanese yen, the Swiss franc and hitting U.S. equities and Treasury yields.
By Thursday, some of those moves had reversed. On Thursday morning, money markets were estimating an 11.61 per cent chance of a rate cut at the Bank of Canada’s next policy meeting on Dec. 4. Estimates on Wednesday were at approximately 20 per cent.
Canadian government bond yields were higher across maturities with the two-year yield up 3.5 basis points to 1.550 per cent and the benchmark 10-year yield up 3.6 basis points to 1.468 per cent.
© Thomson Reuters 2019