Canadian dollar lower after BoC interest rate cut

Tue Apr 22, 2008 10:39am EDT
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By John McCrank

TORONTO (Reuters) - The Canadian dollar fell 0.6 percent against the U.S. dollar on Tuesday after the Bank of Canada did as expected and slashed its key overnight rate by 50 basis points and signaled it may ease more later in the year.

Domestic bond prices were mixed after the announcement.

At 10:22 a.m. EDT, the Canadian dollar was at C$1.0116 to the U.S. dollar, or 98.85 U.S. cents, down from C$1.0056 to the U.S. dollar, or 99.44 U.S. cents, shortly before the central bank's announcement.

On Monday, the currency closed at 1.0060 to the U.S. dollar, or 99.40 U.S. cents.

After back-to-back 50 basis point cuts, the Bank of Canada's key overnight rate is now at 3 percent.

"The Bank of Canada has moved aggressively to keep tighter credit conditions and the U.S. recession from morphing into a Canadian recession," said Doug Porter, deputy chief economist at BMO Capital Markets in a note to clients.

The central bank cited "a deeper and more protracted slowdown in the U.S. economy" as the main threat to the Canadian economy, and as the reason it may have to ease rates more in the future.

The United States takes over three-quarters of Canadian exports, and exports make up around 40 percent of the Canadian economy.   Continued...