C$ slips lower after central bank statement

Tue Jan 19, 2010 4:40pm EST
 
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By Jennifer Kwan

TORONTO (Reuters) - Canada's dollar fell against the greenback on Tuesday after the Bank of Canada held interest rates steady and tweaked its growth outlook, citing weak U.S. demand and a strong Canadian currency as risks to recovery.

The central bank kept its overnight lending rate at 0.25 percent and repeated its conditional commitment to maintain that level until the end of the second quarter.

It also said it now expects 2010 growth of 2.9 percent, down from its previous 3.0 percent forecast, and 2011 growth of 3.5 percent, up from its previous 3.3 percent forecast.

The currency fell as low as C$1.0350 to the U.S. dollar, or 96.62 U.S. cents, its lowest level since January 13, from around C$1.0305 just before the announcement.

"It's in relationship to what the market believes the Bank of Canada will and will not do. It's pretty clear from their policy statement that they're in no hurry to raise rates," said Jonathan Basile, economist at Credit Suisse Securities

"It's going to take some time to get more hawkish. They're not ready to put that hat on yet."

The Canadian dollar finished at C$1.0307 to the U.S. dollar, or 97.02 U.S. cents, down from its close of C$1.0265 to the U.S. dollar, or 97.42 U.S. cents, on Monday.

Doug Porter, deputy chief economist at BMO Capital Markets, said the market may be interpreting the bank's statement as slightly dovish.   Continued...