The CAD/JPY currency pair held in proximity to recent high of 114.63, its strongest level since July 22nd 2024, in thin year-end trade, with investors weighing central bank policy outlook.
The Bank of Japan’s December Summary of Opinions added to investor expectations of continued policy tightening in 2026.
At its December meeting, the BoJ lifted its policy rate to 0.75% from 0.50%. The Summary of Opinions, released Monday, showed some board members saw room for additional rate hikes soon, which provided certain support to the Yen.
The Summary also revealed that a weaker Yen and higher long-term yields were partly due to the BoJ’s policy rate being low relative to inflation. Therefore, markets now expect the central bank to continue normalizing policy.
Meanwhile, the Bank of Canada now has limited room to ease policy after an aggressive rate-cutting cycle in 2024 and 2025.
During that period, the BoC delivered nine rate cuts, including two consecutive cuts in October and November 2024. As a result, Canadian interest rates are already near their lower bound.
The Bank of Canada kept its benchmark interest rate intact at 2.25% at its December policy meeting. The BoC Governing Council said it viewed the current policy rate about right to keep inflation near the 2% target.
Additionally, the Canadian Dollar, which is closely tied to commodity performance, has received a boost from higher Oil prices.
CAD/JPY was last up 0.14% on the day to trade at 114.37.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
