The USD/CAD closed the week at 1.0740 up a few pips from its opening at 1.07299 after it touched a high of 1.0794 as the CAD eased as gold and oil traded in the red mid-week and the US dollar climbed on strong support from Janet Yellen. Canada’s dollar gained as the nation’s consumer price index increased 2.4 percent from a year earlier, the fastest in more than two years, the government reported July 18. The data came two days after the Bank of Canada said inflation gains are temporary and that the nation’s economy won’t fully recover for two years. The bank held the benchmark interest rate at 1 percent, where it’s been for almost four years.



The recent strength of the Canadian and weakness in the dollar has been a surprise, given that many economists expected it to stay weak throughout much of the year. “I think it is fair to say that (the dollar is) stronger than many had thought,” Mark Chandler, head of foreign exchange strategy at RBC Dominion Securities Inc., said Friday.

Among the factors driving the loonie higher: a revised view of Canadian inflation trends, a weaker American economy and currency and a strong demand and prices for Canadian resources, particularly oil.
Chandler considers a weak U.S. currency as the leading factor for the loonie’s relative strength but said it’s also getting a boost from recent Bank of Canada comments that suggest there’s now virtually no chance that short-term interest rates will fall.


Jay Trader
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