Canadian dollar at almost 6-year low as BOC cuts rates
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Tags: Bank of Canada, Loonie
The loonie slid to the weakest level in almost six years as the central bank unexpectedly cut interest rates amid a slump in crude oil.
The currency fell against all 31 of its major peers as the Bank of Canada cut economic forecasts and lowered the benchmark rate target to 0.75 percent, from 1 percent, where it's been since 2010. A survey last week showed economists pushed projections for an increase into next year. Crude, the country's largest export, has tumbled more than 50 percent since June amid a global glut.
"They are taking pre-emptive steps," Thomas Costerg, an economist at Standard Chartered Bank, said in a phone interview from New York. "If oil prices remain under pressure, you could potentially see further cuts. This was not expected, and it's going to put pressure on the loonie."
The currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, depreciated 1.3 percent to $1.2274 per U.S. dollar at 10:15 a.m. Toronto time. It touched $1.2296, the weakest since April 2009.
None of the 22 economists in a Bloomberg News survey predicted the cut. The interest rate, which influences everything from car loans to mortgages, had been at 1 percent since September 2010. The last reduction was in April 2009.
The central bank reduced its growth forecast for the first half of this year to a 1.5 percent annualized pace, from an October estimate of 2.4 percent. Inflation will slow to 0.3 percent in the second quarter, outside the central bank's target range of 1 percent to 3 percent, the bank projected.
The currency fell against all 31 of its major peers as the Bank of Canada cut economic forecasts and lowered the benchmark rate target to 0.75 percent, from 1 percent, where it's been since 2010. A survey last week showed economists pushed projections for an increase into next year. Crude, the country's largest export, has tumbled more than 50 percent since June amid a global glut.
"They are taking pre-emptive steps," Thomas Costerg, an economist at Standard Chartered Bank, said in a phone interview from New York. "If oil prices remain under pressure, you could potentially see further cuts. This was not expected, and it's going to put pressure on the loonie."
The currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, depreciated 1.3 percent to $1.2274 per U.S. dollar at 10:15 a.m. Toronto time. It touched $1.2296, the weakest since April 2009.
None of the 22 economists in a Bloomberg News survey predicted the cut. The interest rate, which influences everything from car loans to mortgages, had been at 1 percent since September 2010. The last reduction was in April 2009.
The central bank reduced its growth forecast for the first half of this year to a 1.5 percent annualized pace, from an October estimate of 2.4 percent. Inflation will slow to 0.3 percent in the second quarter, outside the central bank's target range of 1 percent to 3 percent, the bank projected.
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