The Canadian dollar appreciated against its major counterparts in the New York session on Wednesday, after the Bank of Canada left its key rate unchanged and trimmed its asset purchase programme reflecting the progress in the economic growth.
The BoC kept its key rate unchanged at 0.25 percent, as expected.
The BoC will reduce weekly net purchases of Government of Canada bonds to a target of C$3 billion from C$4 billion.
The economic growth in the first quarter appeared considerably stronger than the Bank’s January forecast, as households and companies adapted to the second wave and associated restrictions, the bank said in the accompanying statement.
Inflation is expected to rise temporarily to around the top of the 1-3 percent inflation-control range in the coming months.
The BoC said that there is still considerable excess capacity, and the recovery continues to require extraordinary monetary policy support, even as economic prospects improve.
The bank remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved, it added.
The loonie spiked higher to 2-day highs of 1.5001 against the euro and 0.9660 against the aussie, after falling to a 1-1/2-month low of 1.5193 and near a 6-week low of 0.9759, respectively in early deals. The currency is seen finding resistance around 1.47 against the euro and 0.94 against the aussie.
The loonie rebounded from its early 1-1/2-month lows of 85.43 against the yen and 1.2654 against the greenback, rising to 86.66 and 1.2480, respectively. On the upside, 88.00 and 1.21 are likely seen as its next resistance levels against the yen and the greenback, respectively.
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