Canadian dollar near 8-month lows as Bank of Canada softens stance

Wed Mar 6, 2013 1:12pm EST
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By Solarina Ho

TORONTO (Reuters) - The Canadian dollar weakened against the U.S. dollar to trade near 8-month lows on Wednesday after the Bank of Canada held interest rates steady and softened its stance on the need for tightening monetary policy.

The central bank said it will likely hold its benchmark rate steady for "a period of time," a tweak from the "less imminent" language used in January.

The central bank held its overnight lending target unchanged - as widely expected - at 1.0 percent, where it has been since September 2010.

"They haven't completely disbanded the very mild tightening bias, but they have found a way to split the hair a little bit further," said Doug Porter, chief economist at BMO Capital Markets.

"It probably is one further slip on the dial lower than what we would've expected and I think the market expected as well."

At 12:15 p.m. (1715 GMT), the Canadian dollar was trading at C$1.0322 versus the U.S. dollar, or 96.87 U.S. cents, weaker than C$1.0288 just before the central bank announcement and its North American finish on Tuesday at C$1.0280.

Shortly after the decision, the currency softened to C$1.0337, near the 2013 low of C$1.0343 it hit on Friday, which was the weakest the currency had been since June 28.

"It's contributing a bit of weakness but I think it will be fairly limited - this isn't a dramatic shift," said Paul Ferley, assistant chief economist at Royal Bank of Canada.   Continued...