Investing.com - The Canadian dollar pared back losses against the broadly stronger U.S. dollar on Wednesday after the Bank of Canada kept interest rates on hold, one day after data showing Canada exited a recession in the third quarter.
USD/CAD was last at 1.3369, up just 0.07% for the day after rising to highs of 1.3407 earlier.
The BoC said it was maintaining the target for the overnight rate at 0.5%, in line with forecasts.
The bank said the economic outlook was still broadly in line with its October monetary policy report, citing a “complex” transition away from the once-booming resource sector.
“The economy continues to undergo a complex and lengthy adjustment to the decline in Canada’s terms of trade,” the bank said in a statement.
Inflation remains close to the bottom of the bank’s target range, the statement said, due to declines in consumer energy prices. Core inflation is close to 2% as the effects of the lower dollar and the output gap continue to offset each other.
The central bank cut rates twice this year to offset the impact of cheaper oil prices on the economy.
The report came one day after official data showing that Canada emerged from a recession in the third quarter, as a pick-up in exports boosted growth.
Statistics Canada said gross domestic product rose by an annualized 2.3% in the three months to September, slightly below forecasts for growth of 2.4%.
The greenback remained broadly stronger as expectations for a rate hike by the Federal Reserve later this month continued to underpin investor demand.
Atlanta Fed President Dennis Lockhart said on Wednesday that U.S. economic data would have to "drastically" alter the nation's outlook over the next two weeks to change the "compelling" case for a December rate hike.
The greenback received an additional boost after payroll processor ADP said the U.S. private sector added 217,000 new jobs last month, the largest increase in five months.
The robust data boosted the outlook for Friday's nonfarm payrolls report.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last up 0.47% to 100.34, the highest level since mid-April.