Bank of Canada’s Concern Over CAD Strength Push Loonie Lower

The Canadian dollar reached the weakest in more than four years after the Bank of Canada lowered its inflation forecast and said the currency remains strong enough to be a competitive challenge for the nation’s exports.

The currency extended a four-month slide versus its U.S. peer as the central bank kept its benchmark interest rate at 1 percent, as forecast by every economist in a Bloomberg survey. It’s been unchanged since September 2010. Bank Governor Stephen Poloz said the direction of his next move will depend on the economy’s evolution. He refrained from inserting language into the bank’s statement on a need for lower interest rates.

“Everything they’ve said here so obviously welcomes the currency going down it would be a small step from that to start allowing the currency to drive domestic policy,” said Adam Cole, head of Group of 10 currency strategy at Royal Bank of Canada, by phone from London. “Even though they didn’t move to an easing bias, it takes us a step closer to that, maybe.”

Bloomberg

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