TORONTO: The Canadian dollar held steady against the greenback on Wednesday, as a surge in oil prices offset a strong signal from the US central bank that it was on track to raise interest rates sometime next year.
The Federal Reserve altered a pledge to keep rates near zero for a "considerable time" in a show of confidence in the US
economy.
The prospect of higher interest rates helped the US dollar rally against a range of currencies.
"It's a nice transitionary statement. Definitely a little bit less dovish, getting into the next stage of the cycle," said David Tulk, chief Canada macro strategist at TD Securities.
"It's shifting the focus away from accommodation and gradually more toward the withdrawal of stimulus."
The Canadian dollar finished the session at C$1.1639 to the greenback, or 85.92 US cents, little changed from Tuesday's close of C$1.1636, or 85.94 US cents.
The currency, which was outperforming a number of other major counterparts, saw a swing of nearly a cent following the Fed statement as markets tried to interpret its intentions.
Financial markets took the Fed's initial wording as dovish, sending the loonie to C$1.1560 against the US dollar, or 86.51 US cents, before further comments dispelled that view.
Yellen also said that the plunge in oil prices was "a net
positive" for the US economy. That plunge has been more painful in Canada, a major exporter of oil, with the loonie tracking declines in crude prices.
The Canadian dollar saw gains earlier in the session after oil, which has lost nearly half its value over the last six months on an excess of supply, jump nearly five percent.
The big gains came after crude prices failed to sink to new lows following bearish crude stockpile data, prompting speculators to buy up contracts or take profits on short positions.
Canadian government bond prices were mostly weaker. The two-year bond slipped 10 Canadian cents to yield 0.998 percent and the benchmark 10-year fell 52 Canadian cents to yield 1.806 percent.
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