The Canadian dollar price recently hit a four-week high, largely due to China's economic stimulus measures. In fact, on Tuesday, the Canadian dollar traded 0.7% higher at 1.3450 to the U.S. dollar, reaching its strongest level since August 28. This boost came despite the Bank of Canada's dovish outlook on future interest rate cuts, as expressed by Governor Tiff Macklem.
The Canadian dollar, took center stage as China's stimulus initiatives spurred growth and renewed market optimism. According to Karl Schamotta, the chief market strategist at Corpay, risk appetite grew across the global currency markets. China's role as a major importer of commodities, including oil from Canada, has significant implications for the Canadian economy.
In tandem with the rise of the Canadian dollar, oil prices surged as China's stimulus programs boosted demand. Additionally, concerns about regional supply disruptions due to potential conflict in the Middle East and a looming U.S. hurricane added to the market's volatility. U.S. crude oil futures rose 1.4%, hitting $71.33 per barrel. This increase also supported gains in Canada's energy and mining sectors, contributing to a record high in the S&P/TSX Composite Index.
Governor Macklem highlighted that while the Bank of Canada has made substantial progress in curbing inflation, with the consumer price index reaching 2% in August, further interest rate cuts remain on the table. Canadian government bond yields also reflected the economic landscape, with the 10-year rate increasing slightly by 1.3 basis points.
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The Canadian dollar reached a four-week high as China's economic stimulus boosted market sentiment. See the factors behind the loonie’s rise.
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