The U.S. dollar rose to more than five-week highs against its Canadian counterpart on Wednesday, after the Bank of Canada left interest rates unchanged and as upbeat U.S. manufacturing activity data boosted the greenback.
USD/CAD hit 1.3349 during U.S. morning trade, the pair’s highest since January 20; the pair subsequently consolidated at 1.3345, up 0.36%
The pair was likely to find support at 1.3282, the low of January 20 and resistance at 1.3388, the high of January 20.
In widely expected move, the BoC kept interest rates on hold at 0.50% and said that the current monetary policy stance remains appropriate.
The decision came shortly after Statistics Canada reported that the current account deficit narrowed to C$10.7 billion in the fourth quarter of 2016 from C$19.8 billion in the third quarter, whose figure was revised from a previously estimated deficit of C$18.3 billion.
Analysts had expected the trade deficit to narrow to C$9.8 billion in the last quarter.
In the U.S., the Institute for Supply Management said its manufacturing activity index rose to 57.7 last month from January’s reading of 56.0. Analysts had expected an unchanged reading in February.
The greenback was already broadly supported Dallas Fed President Robert Kaplan reiterated his view on Monday that a rate hike should come sooner rather than later in order to curb rising inflation.
New York Fed President William Dudley said that the case for tightening monetary policy “has become a lot more compelling”.
Meanwhile, San Francisco Fed President John Williams said that a rate increase was very much on the table for serious consideration at the March meeting given full employment and accelerating inflation.
Earlier today, the U.S. Commerce Department said personal spending increased by 0.2% in January, compared to expectations for a 0.3% rise.
The loonie was steady against the euro, with EUR/CAD at 1.4074.