The Bank of CanadaB次元官网网址檚 largest interest rate hike in 24 years caused the loonie to drop to a 20-month low as investors feared the U.S. Federal Reserve would mirror the full percentage point hike in two weeks.
The Canadian dollar dropped to a low of 75.62 cents US in early trading, its lowest level since Nov. 4, 2020 and nearly one-a-half-cent drop from 77.07 cents US on Wednesday.
Erik Bregar, director FX and precious metals risk management at Silver Gold Bull Inc., said the odds of the Fed increasing rates by one percentage point increased to 90 per cent after the Bank of Canada added an extra 25 basis points to the forecasts of a three-quarters of a percentage point increase.
B次元官网网址淎nd so that just kind of put a flame under the (U.S.) dollar broadly, knocked commodities lower, knocked the S&P lower and I think it frankly just caught everybody off-guard,B次元官网网址� he said in an interview.
Bregar said the loonie is at a B次元官网网址渃ritical junctureB次元官网网址� B次元官网网址� it can rally from the lows or fall even further because thereB次元官网网址檚 not a lot technically to stop a bigger decline.
B次元官网网址淲eB次元官网网址檙e kind of dangling off a little cliff here. The market kind of needs to show us can it recover? If not then weB次元官网网址檙e probably going a lot lower.B次元官网网址�
The currency partially recovered Thursday to 76.12 cents US in afternoon trading after Fed governor Christopher Waller said the market was B次元官网网址渒ind of getting ahead of itself.B次元官网网址�
He said heB次元官网网址檚 waiting for U.S. housing and retail sales data before deciding whether to support an increase above the expected three-quarters of a percentage point.
The U.S. dollar, which has been flying high amid the threat of a recession, gained further ground against most major currencies primarily due to short-term yields rising following a report Wednesday that the annual inflation rate in the U.S. hit 9.1 per cent in June, the highest in more than 40 years.
B次元官网网址淭he U.S. dollar remains so strong that no currency defies its strength,B次元官网网址� said Ipek Ozkardeskaya of Swissquote Bank SA.
Scotiabank chief currency strategist Shaun Osborne said B次元官网网址渞isk aversionB次元官网网址� was dragging the Canadian dollar lower after the Bank of CanadaB次元官网网址檚 bold move.
B次元官网网址淲eaker crude may be weighing on Canadian dollar sentiment at the margin but that would be harsh, given that stronger crude has barely helped the Canadian dollar in the past few months,B次元官网网址� he wrote in a report.
Concerns about the loonieB次元官网网址檚 direction might be focused on the central bankB次元官网网址檚 soft-landing outlook as it jacks up rates, but that doesnB次元官网网址檛 explain ThursdayB次元官网网址檚 big move since there are similar worries about the U.S. Federal ReserveB次元官网网址檚 soft-landing scenario, he said.
The Canadian dollarB次元官网网址檚 early weakness was accompanied by the August crude oil contract falling to a low of US$90.56, its lowest level since February. It subsequently increased to US$95.78.
