CANADA FX DEBT-C$ falls to three-month low after rate cut

Tue Mar 3, 2009 11:08am EST
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* C$ unwinds earlier gains, slips to 77.23 U.S. cents

* Bank of Canada cuts overnight rate to 0.5 percent

* BoC may take extra steps to pump money into system

* Bonds mixed; short-end rises, long-dated falls (Adds details)

By Ka Yan Ng

TORONTO, March 3 (Reuters) - The Canadian dollar wiped out early gains against its U.S. counterpart on Tuesday and hit a three-month low after the Bank of Canada cut interest rates and hinted for the first time that it may turn to unorthodox measures to further stimulate the economy.

The Bank of Canada cut its key overnight rate by half a percentage point to 0.5 percent, a record low, and said it could use additional monetary stimulus "through credit and quantitative easing."

Measures such as buying assets in the market or through other unconventional methods to expand the money supply may be some options the central bank is considering and pledged to unveil when it releases it Monetary Policy Report in April.

"You've got a whole gamut of things coming out of this policy statement to suggest that rates are going to remain low in Canada for a considerable amount of time and you've got the potential for quantitative ease," said Stewart Hall, an economist at HSBC Canada.   Continued...