Investing.com - The U.S. dollar rose to its highest level in three weeks against the Canadian dollar on Wednesday after the Bank of Canada left its overnight rate on hold, in a widely anticipated decision.
USD/CAD touched highs of 1.0794, the most since June 20 before retracting some of those gains, pulling back to 1.0766.
The pair was likely to find support at 1.0725 and resistance at the 1.0800 level.
The BoC said it was leaving its overnight cash rate unchanged at 1%, in line with expectations.
The bank said the recent increase in inflation was due to temporary factors rather than any change in domestic economic fundamentals.
In its rate statement, the central bank said its monetary policy stance was neutral and added that the future direction of monetary policy would be data dependent.
The BoC also revised down its forecast for economic growth saying it now expected growth of around 2.25% during 2014–2016.
The greenback remained supported after Federal Reserve Chair Janet Yellen indicated Tuesday that rates could rise sooner than expected if the recovery in the labor market continues.
In congressional testimony, Ms. Yellen that rates could rise sooner if the economic recovery continued to improve. However, the Fed chair also said that if the recovery was disappointing monetary policy would remain accommodative.
The pair was almost unchanged earlier Wednesday after data showed that U.S. producer prices rose by a larger than forecast 0.4% in June, bringing the annual rate to 1.9%.
Elsewhere, the loonie, as the Canadian dollar is also known, was higher against the euro, with EUR/CAD down 0.18% to 1.4571.