TORONTO, March 6 (Reuters) —The Canadian dollar fell more than two percent last week, as signs point to interest rate increases in the United States while Canada’s rate holds steady.
Last week’s losses for the loonie came as Federal Reserve chair Janet Yellen cemented the view that the Fed will raise interest rates at its March 14-15 meeting.
Yellen noted that the U.S. is adding a strong average of 180,000 jobs a month and the goal of maximum employment has been reached, while inflation is rising towards the goal of two percent.
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In contrast, the Bank of Canada held rates steady at its meeting March 1 as it stayed focused on the “significant uncertainties” facing the economy, including the policies of U.S. President Donald Trump.
Policy divergence will pressure the loonie over the coming months, a Reuters poll predicted.
Canada’s economy grew at a faster pace than anticipated in the final quarter of 2016, lifted by consumer spending and a drop in imports, though the strong figures were seen as unlikely to prod the central bank to soon modify interest rates.
Gross domestic product grew at an annualized 2.6 percent rate in the fourth quarter, Statistics Canada, beating economists’ forecasts for two percent.
