The Canadian dollar strengthened sharply versus its U.S. counterpart to the highest level in six weeks on the back of rising commodity prices. Risk appetite for growth-linked currencies is increasing due to optimism that major central banks will ease monetary policy in an effort to spur global growth.
Crude oil, which is a major Canadian export, rose over US$4 on Tuesday, to hit a high of $88. USDCAD fell 0.5 percent on the day to a low of 1.0121 in the New York trade.
The European Central Bank and Bank of England are holding policy meeting on Thursday while the Federal Reserve meeting is due at the end of July.
There are growing expectations that the Bank of England will expand asset purchases by another £50 billion while some believe the European Central Bank will cut its benchmark lending rate by at least 25 basis points to a record-low 0.75 percent.
Meanwhile, in an interview with Bloomberg News, former Federal Reserve Vice Chairman Alan Blinder helped stoke bets on further US easing, saying the recent run of poor economic data is “strengthening the positions of the doves” on the central bank’s rate-setting committee.
In addition to the major central banks, China’s central banks, the PBOC is also expected to bring down rates to spur slowing Chinese economic growth.