The Bank of Canada stated that they would trim their monthly bond purchases, causing the Canadian dollar to sharply surge and a faster path to an eventual rise in interest rates. The U.S dollar fell 1.1% to fetch 1.2481 Canadian dollars. This year, the U.S currency is down 1.9% compared to the Canadian currency.
The Bank of Canada made a statement on April 21, 2021, following a policy meeting. They said “this adjustment to the amount of incremental stimulus being added each week reflects the progress made in the economic recovery.”
Bank of Canada will trim its weekly net bond purchases
The BOC left interest rates unchanged, however, would trim its weekly net bond purchases from C$4 billion ($3.2 billion) to C$3 billion effective April 26, 2021.
Canada’s 10-year government bond went up by 6 basis points, to 1.56%, as yields rise as bond prices fall. In comparison, the United States saw little movement.
Michael Hewson, chief market analyst at CMC Markets, commented that “the central bank’s “slight tightening, if you can call it that, is entirely justified by recent data which shows the jobs market is recovering with the economy set to grow by upwards of 5% over the year.”
The Bank of Canada said that it is committed to holding its interest rate and based on their latest projection, economic slack will be absorbed sometime in the second half of 2022.