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Loonie strengthens 0.2% against the greenback
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BoC leaves its policy rate on hold at 4.50%
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Price of U.S. oil settles 2.1% higher
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Canada-U.S. 2-year spread hits narrowest in 7 months
(Adds analyst quotes and details throughout; updates prices)
By Fergal Smith
TORONTO, April 12 (Reuters) - The Canadian dollar
strengthened against its U.S. counterpart on Wednesday, as U.S.
inflation data weighed on the greenback and the Bank of Canada
pushed back against bets that it would shift to cutting interest
rates this year.
The Canadian central bank left its benchmark interest rate
on hold at 4.50% as expected but struck a hawkish tone.
"The Bank of Canada wants to have the focus still pretty
much on what's happening with inflation," said Amo Sahota,
director at Klarity FX in San Francisco.
"Even though they think it's a soft landing (for the
economy), they still don't want the market to get too far ahead
of itself and start thinking about the prospects of rate cuts."
Chances of a BoC interest rate cut by September eased to 20%
from 50% before the rate decision, money market data showed. The Canadian dollar was up 0.2% at 1.3435 to the U.S.
dollar, or 74.43 U.S. cents, after trading in a range of 1.3429
to 1.3489.
The gain for the loonie came as data showed U.S. consumer
prices rising less than expected in March, raising expectations
that the Federal Reserve is likely to stop hiking rates after a
possible increase in May.
The U.S. dollar dropped sharply against a basket of
major currencies and the price of oil, one of Canada's major
exports, added to its recent gains. U.S. crude oil futures settled 2.1% higher at $83.26 a barrel.
The Canadian 2-year yield eased 1.8 basis points
to 3.782% as U.S. Treasury yields declined.
The gap between the 2-year and its U.S. equivalent narrowed
by 6 basis points to about 20 basis points in favor of the U.S.
bond, its smallest since September.
(Reporting by Fergal Smith; Editing by Sharon Singleton and
Jonathan Oatis)
