The Canadian dollar CADUSD edged higher against its U.S. counterpart on Tuesday as some calm returned to equity markets globally after recent declines and ahead of a Bank of Canada policy decision this week.
Global equity markets steadied near their lowest levels since mid-July after they were spooked on Monday by Moscow’s latest gas supply cuts and amid lingering concern about central bank efforts to cool inflation.
Money markets expect the Bank of Canada to raise its policy rate by three-quarters of a percentage point on Wednesday.
That would move rates into restrictive territory for the first time in two decades, providing a headwind for Canada’s economy, including the housing market.
Canada’s soaring house prices will decline sharply next year, but still not enough to make them affordable as the Bank of Canada is set to continue raising interest rates and keep them higher for longer, Reuters polls showed.
The Canadian dollar was up 0.1 per cent at 1.3123 to the greenback, or 76.20 U.S. cents, after trading in a range of 1.3097 to 1.3149. Last Thursday, the currency touched its weakest in seven weeks at 1.3207.
The price of oil, one of Canada’s major exports, rose after the Organization of Petroleum Exporting Countries and allies led by Russia decided on Monday to cut their October output target by 100,000 barrel per day. U.S. crude prices were up 1.1 per cent at $87.85 a barrel.
Canadian government bond yields were higher across the curve as trading resumed following Monday’s market holiday. The 10-year rose 7.5 basis points to 3.170 per cent, tracking the increase in U.S. Treasury yields.
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