The Canadian dollar touched its lowest level in nearly six years after the Bank of Canada surprisingly reduced interest rates, explaining that the falling crude oil prices may weigh on inflation and hence bear on the economy.
The loonie fell 1.4 percent to trade at C$1.2283 per U.S. dollar as of 10:32 a.m. in Toronto. It hit C$1.2318, its lowest since April 2009, making it the steepest intraday decline since November 2011. The central bank lowered economic projections and cut the target rate from 1 percent to 0.75 percent, the first rate cut since 2010. Crude oil, the nation’s biggest export, has declined by over 50 percent since June 2014 due to global supply glut.
“They are taking pre-emptive steps,” Thomas Costerg, a New York-based economist at Standard Chartered Bank, told Bloomberg News. “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 yield on the nation’s target 10-year sovereign bond plunged to 1.384 percent, a record low. Canada last lowered its benchmark interest rate, which affects nearly everything from mortgages to car loans, in April 2009.
The Bank of Canada expects the economy to expand by 1.5 percent on an annualized basis in the first half of 2015, down from its previous forecast of 2.4 percent set in October. Inflation is expected to decline to 0.3 percent in the April to June quarter, much lower than the central bank’s forecasted median of 1 percent to 3 percent.
Meanwhile, the Taiwan’s dollar rose the most in 17 months after global investors bought more local stocks, while the yen surged after the Bank of Japan retained its unprecedented stimulus program.
The Taiwan’s currency was up 0.5 percent at NT$31.553 versus its U.S. peer at the close of trade in Taipei after foreign funds purchased an extra $547 million worth of local shares today. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of this story; Jonathan Millet at email@example.com