USD/CAD back above 1.0400 on Central-Bank Stance

The Canadian dollar had the biggest two-day slump in four months after the central bank dropped language about the need for future interest-rate rises that had been in place for more than a year, as risks of a worsening economy increased.

The currency reached a six-week low against its U.S. counterpart after the Bank of Canada said yesterday inflation will remain less than its 2 percent target until the end of 2015, two quarters longer than forecast in July, with the risks of further weakness taking on “increasing importance.” Crude oil, the nation’s largest export, touched the lowest level since June.

“The shift in monetary policy is a driver,” said David Doyle, a strategist at Macquarie Capital Markets, by phone from Toronto. “The U.S. outlook is looking much more positive than Canada’s. That should lead to weakness in the Canadian dollar.”

Bloomberg

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