CANADA FX-C$ tilts lower on soft GDP data, bonds flat
By Ka Yan Ng
TORONTO (Reuters) - The Canadian dollar slumped to a three-week low against the U.S. dollar on Wednesday as expectations of higher interest rates were pared back further after data showed the Canadian economy stalled unexpectedly in April.
Government data showed real gross domestic product in Canada was flat in April after seven straight months of expansion, disappointing market expectations for 0.2 percent growth and casting doubt on the pace of interest rate hikes by the Bank of Canada.
Currencies usually strengthen as interest rates rise as higher rates attract capital flows.
Expectations for a Bank of Canada rate rise in July, as measured by yields on overnight index swaps, dropped to around 50 percent on Wednesday from around 80 percent just last week.
The Canadian dollar touched C$1.0649 to the U.S. dollar, or 93.91 U.S. cents, late in the session, its lowest point since June 7.
It finished not far off the intraday low at C$1.0646 to the U.S. dollar, or 93.93 U.S. cents, down from Tuesday's finish of C$1.0553 to the U.S. dollar, or 94.76 U.S. cents.
For the quarter, the Canadian dollar is off nearly 5 percent, falling from a perch near U.S. dollar parity, as European debt concerns and evidence of an uneven global economic recovery have taken a toll.
"There were a number of moving parts for the Canadian dollar today, led by the softer-than-expected GDP number," said Jack Spitz, managing director of foreign exchange at National Bank Financial. Continued...