TORONTO, April 22 (Reuters) - The Canadian dollar weakened on Wednesday as global equities and oil prices sagged, with the focus on a Bank of Canada report out on Thursday that will outline a potential framework for unconventional policy measures.
Also weighing on the currency was data that showed Canada’s composite leading indicator dropped by 1.3 percent in March on growing weakness in the manufacturing sector. [ID:nOTT001589]
The currency swung widely on Tuesday after the Bank of Canada cut its key overnight rate 25 basis points to a historic low of 0.25 percent and predicted a deeper recession than it had previously forecast. [ID:nN21297335] [ID:nN21480852]
It also surprised the market by saying it will keep its key overnight rate at 0.25 percent until mid 2010 in an aggressive bid to boost the economy.
“The Bank of Canada was pretty dovish yesterday and that sent Canada lower in the morning and then the equity rally sent us back up in the afternoon,” said Steve Butler, director of foreign exchange trading Scotia Capital
“The market is going to basically be watching equities again today,” added Butler. “We’ll be definitely keeping an eye on the risk trade.”
The market will pay close attention to the central bank’s Monetary Policy Report, due for release on Thursday, in which it will outline a framework for potential unconventional measures, such as printing money to buy securities in the market, a policy referred to as quantitative easing.
“We don’t know if we’ll actually see it or not,” said Butler. “The fact they are laying it out and they were so dovish yesterday, I think, indicates they still are quite concerned about the health of the Canadian economy.”
At 9:14 a.m. (1314 GMT), the Canadian dollar was at C$1.2463 to the U.S. dollar, or 80.24 U.S. cents, down from Tuesday’s finish at C$1.2363 to the U.S. dollar, or 80.89 U.S. cents.
Canadian bond prices were mixed with the short end flat to higher and the long end flat to lower, with U.S. Treasuries little changed on Wednesday despite weaker stock index futures. [ID:nN22320865] (Reporting by Jennifer Kwan; Editing by Jeffrey Hodgson)