Canadian dollar notches biggest weekly gain since August

THE heavily shorted Canadian dollar steadied against its US counterpart on Friday (Nov 22), with the currency holding on to a weekly gain as upbeat domestic retail sales data contributed to reduced expectations for Bank of Canada (BOC) interest-rate cuts.

The loonie was trading nearly unchanged at 1.3975 per US dollar, or 71.56 US cents, after moving in a range of 1.3959 to 1.4020. For the week, the currency was up 0.8 per cent, its biggest weekly gain since August.

“The beginning of the week, the market was just crowded short,” said Erik Bregar, director of FX and precious metals risk management at Silver Gold Bull. “If you’re short, you need a lot of bearish fuel and it’s not there right now.”

Canadian retail sales rose 0.4 per cent in September from August as consumers spent more at grocery stores and supermarkets, while preliminary data showed an October gain of 0.7 per cent.

It follows hotter-than-expected consumer price index data on Tuesday and the government’s proposal on Thursday of C$6.3 billion (S$6.1 billion) in new spending that analysts expect to boost the economy.

Investors have largely set aside expectations for another unusually large half-percentage-point rate cut by the BOC next month, after the central bank cut by that magnitude in October.

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By the end of 2025, the market is pricing in 75 basis points of further easing, down from 100 basis points before Tuesday’s inflation data.

“This week’s CPI number has been enough to make the entrenched short-position reconsider over the next few weeks,” Bregar said.

The price of oil, one of Canada’s major exports, settled 1.6 per cent higher at US$71.24 a barrel on the intensifying war in Ukraine this week, while the safe-haven US dollar soared against a basket of major currencies.

The Canadian 10-year yield was down 1.3 basis points at 3.445 per cent, after earlier touching its highest level since Jul 11 at 3.493 per cent. REUTERS