FOREX-Canadian dollar hits the skids while sterling surges

Wed Jan 22, 2014 6:01pm EST
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* Canadian dollar slides as dovish BOC calls for lower currency

* Pound jumps as falling unemployment brings rate hike closer

* Eyes on China's manufacturing sector report

By Ian Chua

SYDNEY, Jan 23 (Reuters) - The Canadian dollar wallowed at four-year lows early on Thursday after the Bank of Canada all but begged the market to sell the currency, while sterling took off as investors priced in an earlier start to rate hikes in the UK.

The loonie traded at C$1.1086 per U.S. dollar after falling as far as C$1.1092 and bringing its decline this year to 4 percent. It fell nearly 7 percent for the whole of 2013.

The pound gained even more, jumping 1.8 percent to its highest since mid-2009 at C$1.8385. Sterling was on a tear after a sharp drop in UK unemployment added to the case for an early tightening.

In contrast the Bank of Canada took a leaf out of the Reserve Bank of Australia's (RBA) play book and tried to talk down the loonie, saying a still strong currency posed an obstacle to exports. It also said it had become more concerned about weak inflation.

"It seems as though Governor Stephen Poloz may revert back to the BOC's easing cycle as the persistent slack in the real economy continues to drag on price growth," said David Song, analyst at DailyFX.   Continued...