By Ketki Saxena
Investing.com -- The Canadian dollar rallied to a two week high against the greenback today, as the Bank of Canada hiked interest rates 25 bps to 5% and hinted at further rate hikes ahead as risks to inflation above the 2% target skew to the upside.
The commodity linked Canadian dollar was also supported by gains in crude, as US inflation data eased Fed fears, somewhat allaying worries of demand destruction for the commodity.
The US dollar meanwhile weakened against a basket of currencies as US inflation cooled, easing to its slowest level in more than two years. Headline US Consumer Price Index (CPI) fell to 3% YoY, while Core CPI came in at 4.8% YoY, with both figures coming in lower than had been expected by economists.
“The Bank of Canada’s 25 basis-point rate hike provided a boost to the loonie as the move wasn’t fully priced into the market,” said Benjamin Reitzes, Canadian rates & macro strategist at BMO (TSX:BMO) Capital Markets. “The broader U.S. dollar weakness after the soft U.S. CPI report gave the Canadian dollar an extra lift.”