The Canadian dollar sank today after the Bank of Canada refrained from raising its interest rates. The currency was weaker even as the statement after the monetary decision was rather hawkish and reiterated that an interest rate hike is possible in the future.
The Canadian central bank kept its main interest rate at 1 percent today. Analysts said that the decision was expected and borrowing costs are not likely to rise soon, resulting in unwillingness of investors to keep the Canadian currency. Worries that the European Central Bank will not be able to support the European economies added to the general risk aversion of the Forex market.
Anyway, the rate statement was hawkish and reiterated the probability of higher lending rates:
To the extent that the economic expansion continues and the current excess supply in the economy is gradually absorbed, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2 per cent inflation target over the medium term.
The employment report will be released later this week. It is expected to be mildly positive, giving hopes to bulls that today’s drop of loonie will not start downtrend.
USD/CAD climbed from 0.9867 to 0.9911 and EUR/CAD advanced from 1.2367 to 1.2502 as of 15:15 GMT today. CAD/JPY slid from 79.51 to 79.00.
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