CAD Lower As Central Bank Maintains Neutral Bias

The Canadian dollar touched its lowest point in over a week after the Bank of Canada maintained a neutral bias on interest rates and said a forecast pickup in business investment has been slow to materialize.

The currency fell against most of its major peers as the central bank held its benchmark interest rate at 1 percent for the 29th straight policy meeting, as forecast by all 18 economists in a Bloomberg News survey. The economy’s recovery “hinges critically” on a shift in demand from indebted consumers to exports and business investment, which will be aided by a weaker Canadian dollar and rising U.S. orders, the bank said in a statement today.

“The Bank of Canada statement was neutral, but I’d say it tilts towards the dovish, and I think a lower Canadian dollar is certainly an appropriate take from this statement,” said David Watt, chief economist at the Canadian unit of HSBC Holdings Plc. “They are less confident about the export and business export rotation they’ve talked about.”

The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, depreciated as much as 0.4 percent to C$1.1024 per U.S. dollar, the weakest since April 4, before trading at C$1.1007 at 11:19 a.m. in Toronto, down 0.3 percent. One loonie buys 90.85 U.S. cents.

The Canadian dollar has been the worst-performing of the greenback’s 16 major peers this year as shifts in the Bank of Canada’s outlook prompted bets it would signal a need for easier monetary policy to spur inflation and boost exports.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza