Narrowing interest-rate differentials

The BOC’s latest rate hike narrows the U.S.-Canada interest-rate differential. As of Nov. 1, the U.S. fed funds rate was at 4.00 percent, in the wake of 12 consecutive rate hikes by the Federal Reserve.

Despite the narrowing, “the interest rate differential is still in favor of the U.S,” says Bob Lynch, head of G-10 FX strategy, America at HSBC. In fact, analysts say Dollar/Canada has trended lower in recent years in spite of negative interest-rate differentials.

Nonetheless, the BOC and the Fed are raising rates at the same pace — Mazanec says both banks are expected to raise them at the next three meetings.