The Canadian dollar gained today, reaching the highest level since May 2013 against the euro, after the Bank of Canada refrained from changing its monetary policy. The rally of crude oil prices added fuel to the loonie’s upward movement.
The BoC kept its benchmark interest rate at 0.75 percent at today’s policy meeting. The central bank voiced no concern about the impact of falling oil prices on inflation, thinking that the weak currency should offset the negative factor:
The effects on core inflation of the lower dollar and the output gap will continue to offset each other.
The bank added:
Risks to the outlook for inflation are now roughly balanced and risks to financial stability appear to be evolving as expected.
It looks like the BoC is content with keeping interest rates stable after the surprise rate cut in January.
As for crude oil prices, they rallied during the current session after the report that showed slower-than-expected growth of US reserves.
USD/CAD dipped from 1.2483 to 1.2391 as of 16:25 GMT today. EUR/CAD tumbled from 1.3294 to 1.3141. CAD/JPY gained from 95.58 to 96.20 after touching the daily low of 94.90.
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