RTTN: Canadian Dollar Extends Rally After Bank Of Canada Rate Rate Decision
(RTTNews) - The Canadian dollar edged sharply higher on Tuesday after the Bank of Canada signaled that it may raise borrowing costs in the near-future.
The Bank of Canada announced Tuesday that it is maintaining its target for the overnight rate at 1 percent. The decision to hold rate was widely expected and the central bank has been keeping the rate steady at an extremely low 1 percent since September of 2010.
The central bank was seen as more hawkish in its accompanying statement, signaling that it may begin raising rates in light of stronger-than-expected domestic growth, a moderation of inflation and the easing of global recession fears.
Further, the central bank hinted that a modest withdrawal of the present monetary policy stimulus "may become appropriate" given the reduced sluggishness in the economy and consistent underlying inflation.
The Canadian dollar touched 0.9867 against its US counterpart around 10:55 am ET, its highest level since March 20 and well above its 50-day simple moving average level. On the upside, 0.9860/50 is seen as the next likely resistance area for the loonie.
Industrial production in the U.S. unexpectedly came in unchanged for the second consecutive month in March, according to a report released by the Federal Reserve today, with a drop in manufacturing output offsetting a notable increase in utilities output.
The report showed that industrial production remained unchanged in March after coming in flat in February. Economists had been expecting production to increase by about 0.3 percent.
Against the yen, the Canadian currency rose to a 1-week high of 81.88 around 10:55 am ET. The loonie-yen pair is presently worth 81.84 with 82.20 seen as the next likely upside target level.
The Canadian currency that tested yesterday's 4-day low of 1.3150 against the euro in early Tuesday Asian deals snapped back to an 11-day high of 1.2966 around 10:25 am ET. On the upside, the loonie may find target around the 1.3085 level.
Germany's economic sentiment improved for the fifth straight month in April, the Mannheim-based Centre for European Economic Research (ZEW) said today. The indicator of economic sentiment rose to 23.4 in April from 22.3 in March. Economists had expected the index to fall to 19.
