US Dollar/Canadian Dollar Exchange Rate Climbs Above 1.3800 as Bank of Canada Maintains Steady Monetary Policy and Investors Bet on Hawkish Federal Reserve Actions

The US dollar/Canadian dollar exchange rate has recently climbed above 1.3800, a level not seen since early 2018. This surge in the exchange rate is largely attributed to the Bank of Canada’s steady monetary policy and investors betting on hawkish Federal Reserve actions.

The Bank of Canada has been keeping its benchmark interest rate steady at 1.75%, despite the US Federal Reserve’s recent rate cuts. This has made the Canadian dollar more attractive to investors, as it offers higher yields than the US dollar. In addition, the Bank of Canada has been taking a more cautious approach to monetary policy, which has helped to support the Canadian dollar.

Meanwhile, investors have been betting on the Federal Reserve taking a hawkish stance on monetary policy. The Fed has recently signaled that it is open to cutting rates further if necessary, but it has also indicated that it is not in a rush to do so. This has led investors to believe that the Fed may be more likely to raise rates in the future, which could lead to a stronger US dollar.

The combination of the Bank of Canada’s steady monetary policy and investors betting on hawkish Federal Reserve actions has resulted in the US dollar/Canadian dollar exchange rate climbing above 1.3800. This is a significant level, as it marks the highest exchange rate since early 2018.

It remains to be seen how long the US dollar/Canadian dollar exchange rate will stay above 1.3800. However, with the Bank of Canada maintaining its steady monetary policy and investors betting on hawkish Federal Reserve actions, it appears that the exchange rate could remain elevated for some time.

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• Source: Plato Data Intelligence: PlatoAiStream