TORONTO: The Canadian dollar was little changed against the greenback on Wednesday as the Bank of Canada disappointed some investors that had expected a shift to a more hawkish stance, with the currency pulling back from its strongest level in nearly three weeks.
The BoC held its benchmark interest rate at 0.25%, as expected, and maintained its guidance that a first interest rate hike could come in April 2022, saying that “devastating floods” in British Columbia last month and the Omicron coronavirus variant could hinder economic activity.
“The Canadian dollar mildly weakened on the back of the release as there was no material upgrade to the Bank’s October projections in the statement,” Simon Harvey, senior FX market analyst for Monex Europe and Monex Canada, said in a note.
“Growth risks brought about by the latest COVID variant and the recent British Columbia crisis meant policymakers kept a fairly noncommittal tone.”
Investors were on guard for a hawkish shift after recent data showed strength in inflation, employment and GDP.
Money market rates eased between 8 and 10 basis points after the decision, with investors expecting the first hike in March or April.
The Canadian dollar was trading nearly unchanged at 1.2642 to the greenback, or 79.10 US cents. Earlier, it touched its strongest intraday level since Nov. 19 at 1.2609 as fears eased about the economic impact of the Omicron variant.
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