Tuesday saw the Canadian dollar push to its highest value in two weeks against its southerly rival as policy makers with the central bank of the northern nation convene to discuss interest rates, Bloomberg reports.
Though the body is unlikely to boost interest rates on Tuesday, it is likely to signal it will in the future. The meeting comes as U.S. Federal Reserve chair Ben Bernanke starts two days of congressional testimony on Capitol Hill in Washington, which analysts will mine for references to a third round of quantitative easing, more colloquially known as QE3.
"The futures market continues to look at a tightening bias by the Bank of Canada in early 2013," chief currency strategist Dean Popplewell with OANDA in Toronto told Reuters. "Canadian long-term interest rates exceed their U.S. counterparts by the largest spread in nine months, which is influencing demand for the loonie. The Canadian dollar is preferred on dollar rallies for reserve and second-tier risk reserve requirements and the fear that the Fed may mention QE3 over the next few days."
All 24 respondents to a Bloomberg poll said the Bank of Canada will leave interest rates at 1 percent.
A Reuters poll indicated a rate hike is likely during the second quarter of 2013.
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