WASHINGTON (Reuters) - The Bank of Canada’s decision to hold interest rates steady last month, coming on the heels of rising oil prices, appears to have pushed hesitant foreign exchange traders to bid up the Canadian dollar, central bank Governor Stephen Poloz said.
He was referring to the central bank’s April 15 rate decision, which came after a surprise rate cut in January and was coupled with a forecast that economic growth would rebound strongly this year from zero growth in the first quarter.
“I think that in the days leading up to the decision, oil prices were breaking out on the upside. They were just steadily moving up. And the Canadian dollar usually responds and wasn‘t,” he told reporters late on Friday on the sidelines of the spring meetings of the International Monetary Fund and the World Bank.
“My sense is that when the decision came, that allowed the market to kind of clear up whatever uncertainties they had and did a little catching up to the oil price. That’s one interpretation anyway.”
Upon release of Wednesday’s rate decision and the central bank’s monetary policy report, the Canadian dollar CAD= rose from C$1.2522 to the U.S. dollar (79.86 U.S. cents) to C$1.2436 (80.41 U.S. cents) within minutes.
Its gains continued as Poloz said in a news conference later on Wednesday that if the economic outlook panned out as projected he would not need to take out any more “insurance,” meaning a further rate cut would not be needed. The Canadian dollar ended at C$1.2300 (81.30 U.S. cents) on Wednesday.
The currency was at C$1.2245 (81.67 U.S. cents) on Saturday.
Canada is a major oil exporter.
Reporting by Randall Palmer; Editing by Paul Simao