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Canadian Dollar Spikes As November Inflation Rate Holds Steady At 3.1%

The Canadian dollar has hit its highest level in nearly five months after the inflation rate in Canada remained unchanged at 3.1% in November.

Investors and futures traders have reduced their bets that the Bank of Canada will begin cutting interest rates in the New Year, a development that has buoyed the currency.

The loonie rose 0.4% to 74.96 U.S. cents, its strongest intraday level since Aug. 4 of this year.

Markets were surprised that Canada's annual inflation rate stayed at 3.1% in November. Economists polled by the Reuters News Agency had forecast November inflation to decline to 2.9%.

Canada’s core inflation rate, which excludes volatile food and energy prices, also held steady at 3.4% in November, according to Statistics Canada.

Futures traders are now placing a 40% chance that the Bank of Canada will begin cutting interest rates in spring 2024, down from 50% previously.

Earlier in December, the Bank of Canada held its benchmark overnight interest rate at a 22-year high of 5%.

Canada’s dollar also got a boost from the price of crude oil, a major export, which rose 1.3% to $73.44 U.S. per barrel.