Dollar rebounds after BoC rate hike

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Dollar rebounds after BoC rate hike

After the Bank of Canada's latest policy move, the Canadian dollar rebounded against its U.S. counterpart on Wednesday, as markets priced in a slightly higher endpoint for interest rate hikes.

The BoC increased its benchmark overnight interest rate by 50 basis points to the highest level in almost 15 years, but it eliminated the forward guidance it used since it began cranking rates higher in March, dropping language that said they would have to rise further.

It looks like markets have taken it a little more hawkish than expected but our take is that we're in the last throes of the rate tightening cycle and moving pretty close to a hold, said Darcy Briggs, a portfolio manager at Franklin Templeton Canada.

Money markets moved to price in a terminal rate or peak level for interest rates this cycle, of 4.43% in June, up about 7 basis points from before the policy decision.

The Canadian dollar was trading 0.4% higher at 1.36 against the dollar, or 73.53 U.S. cents, after touching its lowest level since Nov. 4 at 1.3699.

The Federal Reserve could potentially end its campaign to increase interest rates as China loosens its COVID 19 restrictions and the Fed will likely end its campaign to raise interest rates over the next year, according to a poll by Reuters.

Since the pandemic began three years ago, China has made sweeping changes to its resolute anti-COVID regime.

The price of oil, one of Canada's major exports, was down 0.4% at $73.93 a barrel, down 0.4% as recession fears weighed on.

The 10 year was up 3.2 basis points at 2.808%, after earlier touching its lowest since Aug. 16 at 2.715%.