C$ closes higher after Bank of Canada less dovish than some expected

Wed Dec 2, 2015 5:05pm EST
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By Fergal Smith

TORONTO (Reuters) - The Canadian dollar rose against the U.S. dollar on Wednesday after the Bank of Canada held interest rates steady but used less dovish language in its policy statement than some expected.

Tuesday's news of a large fall in September gross domestic product had left some in the market bracing for a more downbeat outlook from the central bank, according to Doug Porter, chief economist at BMO Capital Markets.

"If the market is at all surprised it is maybe that the Bank was not quite as dovish as some thought they might be today," Porter said.

The bank kept its benchmark rate steady at 0.5 percent, as expected, though it said vulnerabilities in the household sector continued to edge higher.

Earlier, the currency had weakened as crude oil prices retreated after a rise in U.S. inventories added to the global glut and investors were not hopeful that OPEC would cut output at this week's meeting.

U.S. private employers added 217,000 jobs in November, signaling job growth is likely strong enough to support a Federal Reserve interest rate hike this month.

Federal Reserve Chair Janet Yellen said she was "looking forward" to a U.S. interest rate hike that will be seen as a testament to the economy's recovery from recession.

The Canadian dollar CAD=D4 settled at C$1.3349 to the greenback, or 74.91 U.S. cents, firmer than the Bank of Canada's official close on Tuesday of C$1.3364, or 74.83 U.S. cents.   Continued...

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015.  REUTERS/Mark Blinch