USD/CAD Around 1.21 on BOC Cut Speculation

Canada’s dollar weakened to the lowest in more than five years on speculation the central bank may signal it’s more likely to lower interest rates than raise them when it releases a growth outlook tomorrow.  The currency sank as much as 1.5 percent, the most since Jan. 2, before the Bank of Canada updates quarterly inflation and growth projections to factor in the crude-oil slump. It dropped versus most major peers. Charles St-Arnaud, senior economist at Nomura Securities International Inc., said the drop in crude will prompt the central bank to lower its growth forecast by 0.5 percent.

“A lot of investors may not have positioned for tomorrow’s Bank of Canada” meeting, St-Arnaud said by phone from London. “We expect the bank to be quite dovish tomorrow. We know they have to incorporate the lower price of oil in their analysis.”

The loonie, as the currency is nicknamed for the image of the aquatic bird on the C$1 coin, depreciated 1.4 percent to C$1.2113 per U.S. dollar at 5 p.m. in Toronto. It touched C$1.2115, the weakest level since April 2009. Nomura forecasts it will reach C$1.25 by the middle of the year. One Canadian dollar purchases 82.71 U.S. cents.


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