TORONTO: The Canadian dollar strengthened on Wednesday to a six-week high against its US counterpart after the Bank of Canada held interest rates unchanged and offered a tentative nod to recent signals of strength in the economy.
The Canadian dollar gained around 0.40 percent against the US dollar, last trading at C$1.3271 to the greenback, or 75.35 US cents, stronger than Tuesday's close of C$1.3332, or 75.01 US cents. It marked the strongest level for the currency since Feb. 28.
The Bank of Canada, as expected, held rates steady and said recent economic growth has been faster than expected. Still, it cautioned that it was too soon to conclude the Canadian economy was on a sustainable growth path.
The dollar was "reacting to the headlines, certainly a nod from the bank to stronger growth trends recently," said Shaun Osborne, chief currency strategist at Scotiabank.
"The headline suggests the bank is taking a positive outlook on the Canadian economy, but I think a deeper read on this suggests not an awful lot is going to change here. And it certainly doesn't bring rate increases any closer than we were before. We may see a bit of a counter reaction (on the currency) when people have a deeper read of this."
Gains for Canada's risk-sensitive currency came as a break in alarming international political news cooled a safe-haven rally that saw the yen and gold at five-month highs and top-rated government bond yields at their lowest this year.
Canadian home prices rose in March, extending their climb in major cities in Ontario and British Columbia, according to data which was likely to add to concerns about housing affordability in some parts of the country.
Canadian government bond prices were mixed, with the two-year down 2.5 Canadian cents to yield 0.745 percent and the 10-year unchanged to yield 1.545 percent.
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