CANADA FX DEBT-C$ falls after Bank of Canada cuts rate

Tue Apr 21, 2009 9:47am EDT
 
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* C$ at 79.98 U.S. cents

* Bank of Canada cuts rate 25 basis points to 0.25 percent

* Bond prices higher across the curve

By Jennifer Kwan

TORONTO, April 21 (Reuters) - The Canadian dollar weakened versus the U.S. dollar on Tuesday morning after the Bank of Canada cut its key benchmark interest rate to 0.25 percent, but made no explicit promise to take unconventional measures to boost the economy.

The central bank cut its benchmark interest rate to a historic low of 0.25 percent from 0.50 percent and predicted a deeper recession than it had previously forecast [ID:nN21297335].

It took the unusual step of providing guidance on rates, saying its key overnight rate will stay at 0.25 percent until mid 2010.

"I think the implications obviously over the short term are negative for the Canadian dollar in terms of the reaction to the lower interest rates as well as the forecast changes," said George Davis, chief technical strategist RBC Capital Markets.

Davis added the market will pay close attention to the central bank's Monetary Policy Report, due for release on Thursday, when it outlines a framework for unconventional measures known as quantitative easing.

At 9:25 a.m. (1325 GMT), the Canadian dollar was at C$1.2503 to the U.S. dollar, or 79.98 U.S. cents, down from C$1.2385 to the U.S. dollar, or 80.74 U.S. cents, at Monday's close.

Canadian bond prices were higher across the curve. (Reporting by Jennifer Kwan; editing by Peter Galloway)