BLBG: Canadian Dollar Gains as Central Bank Leaves Rate Unchanged
Canada’s dollar gained after the nation’s central bank left its key interest rate unchanged at a record low.
The currency strengthened 0.2 percent to C$1.1085 per U.S. dollar at 9:16 a.m. in Toronto, compared with C$1.1104 yesterday. The loonie, as the currency is known, touched C$1.0785 June 1, the strongest since Oct. 3.
The Bank of Canada also said the “unprecedentedly rapid rise” in the currency could “fully offset” recent improvements in financial markets and consumer confidence and prolong the recession.
“This is pretty much in line with expectations,” said Firas Askari, head currency trader in Toronto at BMO Nesbitt Burns, a unit of Bank of Montreal. The statement about the rapid rise in the loonie is “a little bit of a warning shot across the bows, but it’s not enough to influence the short-term fluctuations of the Canadian dollar.”
The central bank halved the interest rate at its last meeting, on April 21, to 0.25 percent from 0.5 percent. Bank Governor Mark Carney told a House of Commons panel in Ottawa a week later that he aimed to leave the rate unchanged until the end of June 2010 and didn’t anticipate using extraordinary policies to give the economy another boost.
The Canadian dollar gained 12 percent versus its U.S. counterpart in the first five months of the year as crude oil climbed 48 percent. Raw materials including oil account for more than half of Canada’s export revenue.
