By Chris Fournier Oct. 21 (Bloomberg) -- Canada's currency fell to the lowest in more than three years after the central bank cut borrowing costs for the fifth time since December. Canada's dollar has depreciated 12 percent this month as commodity prices weakened. Policy makers lowered the key rate a quarter-percentage point to 2.25 percent. Economists had forecast a half-point reduction, the median of 25 estimates. ``Typically, cutting rates a bit less than expected would have helped the Canadian dollar,'' said Avery Shenfeld, senior economist at CIBC World Markets Inc. in Toronto. ``That impact was largely washed away by the bank's reference to further monetary stimulus being likely ahead.'' The Canadian dollar depreciated by as much as 2.2 percent to C$1.2172 per U.S. dollar, from C$1.1910 yesterday. It touched the lowest since August 2005. It traded at C$1.2163 at 11:29 a.m. in Toronto. One Canadian dollar buys 82.21 U.S. cents. The loonie, as the currency is known because of the aquatic bird on the one-dollar coin, has weakened for three straight weeks against its U.S. counterpart. ``The loonie did not get any support even though some had expected a more aggressive cut of 50 basis points,'' said John Rothfield, Banc of America Securities LLC senior currency strategist in San Francisco. ``Today's trading action in the foreign-exchange market has been dominated by U.S. dollar shortages and hence U.S. dollar strength.'' The U.S. dollar gained versus 15 of the 16 most-actively traded currencies today. `Incredibly Dovish Statement' ``The smaller-than-expected cut was positive for the Canadian dollar for about one second before the incredibly dovish nature of the statement swamped that sentiment and sent the Canadian dollar careening lower,'' said Eric Lascelles, a strategist at TD Securities in Toronto. Policy makers trimmed the target rate for overnight loans between commercial banks to 2.25 percent, the lowest since October 2004. ``Some further monetary stimulus will likely be required,'' Governor Mark Carney and his five deputies said in a joint statement. A cut in gross domestic product forecasts for 2008 and 2009 and the bank's statement about further stimulus, along with weak commodity prices and lower equity futures ``should weigh on the Canadian dollar,'' said George Davis, chief technical analyst at RBC Capital Markets in Toronto, a unit of Canada's largest bank. Trading Range Davis's ``expected three-month trading range'' for the Canadian dollar is C$1.15 to C$1.21, he wrote in a note today before the central bank released its decision. The Bank of Canada lowered its key rate to 2.5 percent from 3 percent on Oct. 8 as part of a coordinated effort to ease the economic effects of the financial crisis. Canada's dollar declined 2 percent that day. Canada's dollar fell 0.3 percent and 0.4 percent respectively against its U.S. counterpart when the central bank cut rates on April 22 and March 4, according to Bloomberg data. The yield on the two-year government bond dropped 3 basis points, or 0.03 percentage point, to 2.17 percent. The price of the 2.75 percent security due in December 2010 rose 5 cents to C$101.19. The 10-year note's yield was little changed at 3.72 percent. The price of the 4.25 percent security maturing in June 2018 rose 4 cents to C$104.29. To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

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