C$ posts three-and-a-half-month high as Poloz signals rate hikes

Tue Jun 13, 2017 5:12pm EDT
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By Fergal Smith

TORONTO (Reuters) - The Canadian dollar strengthened to a 3-1/2-month high against its U.S. counterpart on Tuesday as comments by Bank of Canada Governor Stephen Poloz supported the view the central bank could raise interest rates sooner than previously thought.

Interest rate cuts instituted in 2015 have largely done their job as the Canadian economy gathers momentum, the Bank of Canada's head said, the second top official in as many days to set the stage for rate hikes.

Chances of an interest rate hike this year have surged to three-in-four from less than one-in-four before stronger than expected jobs data on Friday, data from the overnight index swaps market shows.

At 4 p.m. EDT (2000 GMT), the Canadian dollar CAD=D4 was trading at C$1.3237 to the greenback, or 75.55 U.S. cents, up 0.7 percent.

The currency's weakest level was C$1.3325, while it touched its strongest since Feb. 28 at C$1.3212.

Strengthening of the currency could put pressure on often-leveraged speculators to cover short positions and accelerate any move higher in the currency.

"The market was excessively short Canadian dollars, so this could be a move that is a little bit overdone," said Michael Goshko, Corporate Risk Manager at Western Union Business Solutions.

Bearish bets on the loonie held near a record high as of June 6, data from the Commodity Futures Trading Commission and Reuters calculations showed on Friday.   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