The Canadian dollar managed to record its biggest rise since June 2020 against its US counterpart yesterday, and the Canadian stock market rebounded, as investors welcomed the Bank of Canada's move to dial back emergency support to the economy.
The Canadian dollar rose to 1.2458 against the US dollar, its highest since March 18, despite pressure on oil prices, one of Canada's main exports, and the main Canadian stock index finished 0.5% higher at 19143.25, recouping some of its losses during the previous two days.
Bank of Canada indicated that it may start raising interest rates in late 2022, as it sharply boosted its outlook for the Canadian economy and slashed the pace of bond purchases to 3 billion Canadian dollars per week from 4 billion Canadian dollars. The central bank began a large-scale bond-buying program last year to support the economy during the coronavirus crisis.
The stimulus cut is putting the Canadian central bank at odds with some of the other major central banks, such as the Federal Reserve and the European Central Bank, which have said they will maintain or increase the pace of bond purchases.
