The Canadian dollar suddenly jumped today, reaching the parity with its U.S. counterpart, as the signs of the expanding nation’s economic growth and the widening inflation may encourage the central bank’s policy makers to raise the interest rates.
The Bank of Canada was keeping the interest rates at the same level since April 2009 and has pledged to keep the target rate for overnight loans between banks at 0.25 percent unchanged through June. The dropping of this pledge signals that the interest rates may jump by June, the good sign for the Canada’s economy and its currency in the near term.
The Governor Mark Carney stated:
With recent improvements in the economic outlook, the need for such extraordinary policy is now passing, and it is appropriate to begin to lessen the degree of monetary stimulus. The extent and timing will depend on the outlook for economic activity and inflation.
USD/CAD traded near 0.9984 as of 17:17 GMT today after opening at 1.0142. EUR/CAD traded at about 1.3414 after it opened at 1.3685.
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