C$ slides as global fears dwarf Quebec, BoC news

Wed Sep 5, 2012 4:50pm EDT
 
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By Solarina Ho

TORONTO (Reuters) - The Canadian dollar weakened against the U.S. currency and euro on Wednesday as investors focused on European monetary policy and global economic growth, eclipsing the impact of 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 its tightening bias, while the separatist Parti Quebecois resumed power in the province of Quebec, snagging enough seats in Tuesday's election to form a minority government.

But currency traders were more concerned with a key European Central Bank meeting on Thursday. A report that the ECB may buy an unlimited amount of government bonds issued by debt-plagued countries fueled buying in the euro against the U.S. dollar and commodity-linked currencies, including the Canadian dollar. <FRX/>

"It's the global drivers that are probably the most important," said Camilla Sutton, chief currency strategist at Scotiabank.

"What the ECB decides tomorrow, as well as the global growth outlook ... we have seen some signs that there has been some deterioration, those are the ... broader drivers of Canada overall."

BANK OF CANADA REMAINS HAWKISH

The Bank of Canada kept its main policy rate at 1 percent, as expected, and reiterated its message that it may have to raise interest rates, despite a global slowdown, due to expectations the domestic economy will gain momentum this year and next.

The Canadian dollar pared some losses immediately after the rate decision, before sliding further to hit a session low of C$0.9919 against the U.S. dollar, or $1.0082.   Continued...