Canadian dollar soars as BoC hikes interest rate for the first time in 7 years

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[Housing and consumer debt account for 90 per cent of the growth in Canadian GDP. There's good reason to think this will be a (politically driven?) bad move for Canada. Click here to watch a good video on why it is misguided for the Bank of Canada to raise rates. Keep an eye on what happens with GDP over the next year. *RON*]

Linda Nguyen, Canadian Press, 12 July 2017

TORONTO — The Canadian dollar soared this morning after the Bank of Canada announced it was hiking its key lending rate.

The loonie was up 0.67 of a U.S. cent at 78.06 cents US about an hour after the central bank’s decision. The last time the dollar closed above 78 cents US was in August 2016.

The Bank of Canada says it’s raising its benchmark interest rate by a quarter of a percentage point to 0.75 per cent — its first increase in nearly seven years.

It had slashed its interest rates in 2015 to help the economy deal with a plunge in oil prices that began in late 2014. The bank’s governor has said recently that those rate cuts have done their job.

Canada’s dollar has been rising for weeks amid growing expectations that the rate would be raised. Its gain was It was also helped on Wednesday by higher oil and gold prices.

The August crude contract was up 13 cents to US$45.17 and the August gold contract was up $7.70 to US$1,222.40 an ounce. The September copper contract was up one cent at US$2.68 a pound. The August natural gas contract was down seven cents to US$2.98 per mmBTU.

The Toronto Stock Exchange’s S&P/TSX composite index was up a marginal 8.3 points to 15,157.44, after climbing more than 100 points shortly after the central bank decision at 10 a.m. ET. The index was led by gains by Canada’s energy, financials and consumer staples sectors.

In New York, the Dow Jones industrial average gained 128.44 points to 21,537.51, the S&P 500 index was ahead 16.44 points to 2,441.97 and the Nasdaq composite index climbed 59.17 points to 6,252.48.


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