Canadian dollar gains despite oil drop as Fed's Yellen talks caution
By Alastair Sharp
TORONTO (Reuters) - The Canadian dollar strengthened to a near one-week high against its U.S. counterpart on Tuesday after Federal Reserve Chair Janet Yellen said the U.S. central bank should proceed "cautiously" with rate hikes.
The comments offset factors that would have otherwise weighed on the Canadian currency, including a drop in oil prices and soft domestic data, and also repudiated more hawkish statements from other Fed officials in recent days.
"It's really now or never for them to raise one more time or maybe two more times, and I just don't think that's going to happen," said Blake Jespersen, managing director of foreign exchange sales at BMO Capital Markets.
The Fed raised rates in December for the first time in nearly a decade but has since paused its tightening, downgraded its economic expectations and cut its prediction to two hikes this year from four eyed in December.
The Canadian dollar CAD=D4 settled at C$1.3065 to the greenback, or 76.54 U.S. cents, much stronger than Monday's close of C$1.3181, or 75.87 U.S. cents, touching its strongest level since March 23.
The currency rose despite a drop in oil prices of some 3 percent, reflecting growing concern a two-month rally was fading as demand fails to keep up with swelling global supply.
The currency also brushed off the largest drop in Canadian producer prices in more than a year in February.
A more cautious Fed and oil holding on to recent gains could help the Canadian currency make further gains. Continued...