FIN: Canadian dollar resumes record slide as Bank of Canada holds rates
The Canadian dollar resumed a record losing streak after the nation’s central bank kept interest rates unchanged in the face of sinking oil prices.
The loonie reached the cheapest level since 2003 as the Bank of Canada held its benchmark at 0.5 per cent and said stronger U.S. demand, a weaker currency and last year’s rate cuts are leading the economy out of an oil slump. Before the decision, traders had assigned better than a 50 per cent chance of a reduction, according to data compiled by Bloomberg.
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the $1 coin, weakened 0.4 per cent to $1.4641 per U.S. dollar at 10:59 a.m. in Toronto. The currency briefly gained after the rate decision, before surrendering the advance as traders speculated the central bank will cut rates in coming months.
Wednesday marked the loonie’s 14th straight daily decline, the longest losing streak since the country ended its currency’s peg to the greenback and let it trade freely in 1971.
Prices of crude oil, until last year Canada’s largest export, reached a 12-year low Wednesday on signs a global supply glut won’t ease any time soon while demand may stay muted as worldwide economic growth slows.
The Bank of Canada cut interest rates twice last year, saying the economy needed help as it transitioned to non- commodity exports from oil as its main driver. A three- year slide in the loonie has helped, though the country’s manufacturing capacity still remains below its heyday as it faces stiffer competition from the likes of Mexico and China.
“The protracted process of reorientation towards non-resource activity is underway, helped by stronger U.S. demand, the lower Canadian dollar, and accommodative monetary and financial conditions,” policy makers led by Governor Stephen Poloz said in a statement.
