Loonie leaps to highest level as BoC raises interest rate

The Canadian dollar nicknamed Loonie leaps to its highest level in over two years against its US counterpart yesterday, after the country’s central bank raised interest rates to 1 per cent in response to a stronger economy.

It is the second time this year that the Bank of Canada (central bank) has upped the rate after hiking it for the first times in seven years in July 2017. This rate has an impact on lending rates that consumers and savers get from banks or mortgages, lines of credits, savings accounts and other financial services.

According to statistics, Canada reported the Canadian economy had its strongest first half to the year since 2002. The level of GDP is also now higher than the bank had expected.

Canada has been in the forefront of the G10 central bank other than the Federal Reserve shifting policy away from the monetary stimulus. The Canadian dollar appreciated more than two cents to $ 1, 2119 before easing to 1.2213 late trading in London, 1.2 per cent gain on the day.

The new rate on the grounds of stronger than expected economic data had investors rushing to the Canadian dollar, pushing its rise against the US dollar in the past four months to over 12 per cent. BoC noted how geopolitical risks and international trade tensions had weakened the US dollar, resulting in some of the Canadian dollar’s recent appreciation.