Major North American indices fell after the U.S. Federal Reserve Board said it will raise interest rates this year more times than initially expected.
The Toronto Stock Exchange’s S&P/TSX composite index fell by 23.16 points to 16,265.82.
In New York, the Dow Jones industrial average shed 119.53 points to 25,201.20. The S&P 500 composite index retreated by 11.22 points to 2,775.63 and the Nasdaq composite index lost 8.09 points to 7,695.70.
The fall came after the Fed issued a statement saying it was raising its benchmark interest rate by 25 basis points to 2% — the second rate hike this year.
The Fed also announced it would raise rates another two times this year, bringing the 2018 total to four when many investors expected three.
“There’s going to be a lot more pressure on the Canadians right now if we’re seeing four rate hikes from the States to do at least one … if not two this year,” said Michael Currie, vice president and advisor at TD Wealth Private Investment Advice.
The Bank of Canada (BoC) is expected to raise rates in July, said Currie, but now the likelihood that it will do so again before the end of 2018 has gone up. The BoC will have three more interest rate announcements after July 11.
Foreign investors look for the best rates in stable countries for their money, he said, and often choose between Canada and the U.S.
People moving their money out of Canada into the U.S., he said, pushes down the loonie.
“The best way to defend the dollar is to keep raising rates.”
The Canadian dollar averaged US76.99¢, up by 0.09 of a U.S. cent.
The July crude contract gained US28¢ to US$66.64 a barrel and the July natural gas contract advanced about two cents to US$2.96 per mmBTU.
The August gold contract rose by US$1.90 to US$1,301.30 an ounce and the July copper contract moved up by about a penny to US$3.25 a pound.