C$ retreats from nearly 3-week high on dovish BoC
By Fergal Smith
TORONTO (Reuters) - The Canadian dollar fell against its U.S. counterpart on Wednesday, retreating from a nearly three-week high after a more dovish than expected Bank of Canada statement.
The central bank held its policy rate steady at 0.50 percent even as it said global growth was weaker than expected, noting that even if Canadian exports rebound, the ground lost over previous months could lower the profile for economic activity.
"The overall interpretation is maybe a little bit more dovish than what we had thought going in," said David Tulk, chief Canada macro strategist at TD Securities.
Bets on a Bank of Canada interest rate cut increased very slightly. The implied probability of a rate cut by the end of the year rose to 13 percent from 10 percent before the rate decision, overnight index swaps data showed. BOCWATCH
The central bank's concern about the outlook for U.S. business investment "feeds into the Canadian export profile," said Jimmy Jean, senior economist at Desjardins.
Weak U.S. business investment has hampered a long-awaited pick-up in growth of Canada's non-energy exports, while a weaker Canadian dollar has not helped exports as much as expected.
The pace of purchasing activity in Canada slowed more than expected in August as employment growth slumped and inventories grew, according to Ivey Purchasing Managers Index data. The seasonally adjusted index fell to 52.3 from 57.0 in July.
At 11:35 a.m. EDT (1535 GMT), the Canadian dollar CAD=D4 was trading at C$1.2897 to the greenback, or 77.54 U.S. cents, weaker than Tuesday's close of C$1.2847, or 77.84 U.S. cents. Continued...