Canadian dollar rides momentum higher, bonds up
Mon Jul 9, 9:37 AM
TORONTO (Reuters) - The Canadian dollar touched a new 30-year high early on Monday ahead of Tuesday's Bank of Canada rate announcement, but slipped back slightly at the start of the North American session.
Domestic bond prices made slight gains with no major data on the schedule today for Canada or the United States.
At 9:15 a.m. (1315 GMT), the Canadian dollar was at C$1.0480 to the U.S. dollar, or 95.42 U.S. cents, up from C$1.0490 to the U.S. dollar, or 95.33 U.S. cents, at Friday's session close.
The Canadian dollar touched C$1.0445 to the U.S. dollar, or 95.74 U.S. cents, ahead of the announcement, where the Bank of Canada is expected to raise its key overnight rate for the first time in over a year.
A Reuters poll on Friday showed all 13 of the country's primary securities dealers expect a 25 basis point hike to 4.50 percent, and the majority expecting another hike in September.
Analysts will be looking to the accompanying statement for clues as to whether the bank will keep raising rates.
"I don't think there's anything that should cause the bank to be dovish," said George Davis, chief technical strategist at RBC Capital Markets.
"I think if anything, they have to lean on the hawkish side of the equation and signal that there are some additional rate hikes coming in order to move inflation back to the midpoint of their target band."
The bank targets inflation near the center of a 1-to-3 percent target range. Inflation in May was 2.2 percent.
A raft of strong Canadian economic data has lifted the Canadian dollar, as has the price of commodities.
"If we continue to see crude oil prices rally and start pushing above $75 a barrel, I think that could be a catalyst to push dollar Canada ... towards parity," said Davis.
Canada has a commodities-based economy and the currency often moves with the price of oil.
Domestic data this week include June housing starts on Tuesday, as well as new home prices for May and international merchandise trade for May on Thursday.
The Bank of Canada issues its monetary policy update on Thursday, providing further explanation to the rate decision.
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