Bank of Canada Keeps Interest Rates Unchanged, Loonie Down

The Canadian dollar dropped today after the Bank of Canada left the overnight rate unchanged and as China raised its interest rates, damping the demand for the growth-related currencies.

The Bank of Canada kept its benchmark overnight rate at 1.0 percent. Such decision wasn’t unexpected and was predicted by the analysts, who now think that the Bank may keep the rates unchanged for a prolonged period of time. The Bank said in its statement:

At this time of transition in the global recovery, with a weaker U.S. outlook, constraints beginning to moderate growth in emerging-market economies, and domestic considerations that are expected to slow consumption and housing activity in Canada, any further reduction in monetary policy stimulus would need to be carefully considered.

The statement was really dovish and weakened the Canadian currency. The interest rates hike in China, which weakened the higher-yielding currencies, also gave the reason for the loonie to go down.

USD/CAD climbed from 1.0170 to 1.0343 as of 18:08 GMT today, following the advance to the intraday high of 1.0372. EUR/CAD rose from the opening level of 1.4174 to 1.4215 after it earlier reached 1.4309.

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