Switch

Canadian Dollar Gets Interest Rate Boost; Rand Dips on Budget Disappointment

The Canadian dollar received a significant boost on Wednesday after the Bank of Canada said it would “need to raise [interest rates] to a neutral stance to achieve the inflation target.” As widely expected, the BoC also hiked its benchmark rate by 25 basis points to 1.75 percent.

The Canadian dollar strengthened by nearly a full dollar as USD/CAD tumbled from C$1.3085 to C$1.2993 in the minutes following the BoC’s statement.

Chief among reasons for economic optimism at the BoC is September’s trade deal between Canada, the US and Mexico—the USMCA—which “reduces the trade policy uncertainty in North America that has been an important curb on business confidence and investment.”

Wednesday also brought with it a two-month high in the US dollar’s buying power. The US Dollar Index, which measures the greenback’s value against a basket of currencies, climbed half a percent to 96.50—the index’s highest level since August-17.

The South African rand fell sharply though, after South Africa’s finance minister, Tito Mboweni, announced that government debt will rise for two years more than previously forecast.

Within an hour of Mboweni delivering his medium-term budget—a budget described as “candid and disappointing” by Nedbank analyst Mehul Daya—the rand lost 30 South African cents against the dollar, to R14.45.

Also disappointing on Wednesday was the euro, which fell eight tenths of a cent to a nine-week low of $1.1390 after a measure of growth in German business activity came in at a three-and-a-half-year low. The euro, therefore, emulated its Brexit-troubled pal, the pound, which struggled one day earlier on evidence of UK manufacturing weakness.

 
Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product.