Canadian Dollar Surges Against US Dollar

TORONTO, Dec 5 – The Canadian dollar experienced a notable increase against the U.S. dollar, rising by 0.7%—the first significant uptick in six months. This surge came after a favorable domestic employment report heightened expectations for potential interest rate hikes from the Bank of Canada in the coming year.

Trading at 1.3854 cents (which translates to about 72.18 US cents), this marked the highest valuation since September 24, suggesting a potential rally not seen since late May.

Interestingly, the job market data indicated that Canada added 53,600 new jobs in November, resulting in the unemployment rate dipping to a 16-month low. This trend reflects ongoing solid employment growth for the third month in a row.

Nathan Janzen, an assistant chief economist at the Royal Bank of Canada, remarked that, “Given third-quarter GDP growth and the better-than-expected labor market statistics from the prior months, it seems unlikely that the Bank of Canada will opt to lower rates in its upcoming policy decision.” He added that the job figures for November reinforce the notion that rate cuts might not be on the table until next year.

According to a Reuters survey, the central bank is expected to maintain its benchmark interest rate at 2.25%, which is the lowest in three years.

Moreover, market sentiment now fully anticipates a rate increase by 2026, especially following the positive jobs report, with probabilities climbing from 20% prior.

The pricing of crude oil, one of Canada’s key exports, also worked in favor of the Canadian dollar, as U.S. crude futures rose by 1.2% to $60.37 per barrel, partly due to stalled peace negotiations in Ukraine.

On the bond side, Canadian yields increased across the board, with the two-year bond yield gaining 16.7 basis points to reach 2.631%, marking its highest point since early September.