The Canadian dollar rose slightly against the U.S. dollar on Tuesday, as recent fluctuations in U.S. bond yields stabilized and investors turned their attention to the Bank of Canada’s interest rate decision. The loonie traded at 1.3820 to the U.S. dollar, or 72.36 U.S. cents, within a range of 1.3814 to 1.3820. This marked a rebound after touching an 11-week low of 1.3849 on Monday.
"The stall in U.S. yields has led to broader consolidation in the USD," said George Davis, chief technical strategist at RBC Capital Markets. "USD-CAD has followed suit as the market awaits tomorrow's Bank of Canada meeting for new direction."
The U.S. 2-year yield remained stable at 4.030%, having increased more than 50 basis points since September. The U.S. dollar index held near its highest level against a basket of major currencies since August 2.
Investors expect the Bank of Canada to cut its benchmark interest rate by half a percentage point on Wednesday. This would be the first reduction greater than 25 basis points in 15 years, excluding the pandemic era. Since June, the central bank has eased three times by 25 basis points, leaving the policy rate at 4.25%.
The price of oil, a key Canadian export, rose 2.2% to $72.09 per barrel, as traders downplayed hopes for a Middle East ceasefire and focused on a tightening global supply-demand balance.
Wall Street's major indexes ended mostly flat on Tuesday as investors monitored U.S. Treasury yields and reviewed corporate earnings reports.
In Canada, producer prices dropped by 0.6% in September compared to August, partly due to lower prices for energy and petroleum products. Canadian dollar bond yields were mixed, with the 10-year yield down 0.7 basis points at 3.227%, retreating from an earlier 11-day high of 3.261%.
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The Canadian dollar strengthens as U.S. bond market stabilizes, with investors eyeing the Bank of Canada's upcoming rate decision.
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