Canadian dollar down on global fear; little Quebec, BoC impact

Wed Sep 5, 2012 11:04am EDT
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By Solarina Ho

TORONTO (Reuters) - Canada's dollar weakened against its U.S. counterpart on Wednesday, as ongoing worries about the global economy and European monetary policy overshadowed a Bank of Canada rate decision and an election in French-speaking Quebec.

The Bank of Canada left its main policy rate unchanged but stuck to it tightening bias. And the separatist Parti Quebecois resumed power in the province of Quebec, winning enough seats to form a minority government.

But currency traders were more focused on a key European Central Bank meeting on Thursday, debating whether a plan to tackle to euro zone's debt crisis and slowing growth will be as bold as hoped. <MKTS/GLOB>

The impact of slowing growth in China on commodity prices also added to concerns. <O/R>

"In the global context of things, right now, the market - whether it's Canada or anyone else - is really going to be focused on what happens from the ECB," said Mazen Issa, macro strategist with TD Securities.

"Right now, I think the Bank of Canada is probably happy to take a back seat to global developments and watch what it means for Canada more generally."


The Bank of Canada kept its main policy rate at 1 percent, as expected, and stuck doggedly to its message that it may have to raise interest rates despite a global slowdown, predicting the domestic economy would gain momentum this year and next and inflation return to target within a year.   Continued...