The Canadian dollar slid to its lowest value against the U.S. dollar in nearly two weeks on Tuesday as comments from Bank of Canada Governor Mark Carney raised flags over the central bank’s intention to boost interest rates.
The loonie fell 0.7 of a cent to $1.0134 (U.S.), coming off a steeper decline of 0.83 cents earlier in the session. The drop takes the loonie to its lowest level since Oct. 4, when it began to strengthen against the U.S. dollar.
Much of the currency’s direction was linked to a speech from Mr. Carney late Monday that was notable for what he didn’t say and interpreted as a more dovish tone toward the possibility of interest rate increases.
Mr. Carney did not include in his speech an often-repeated line that “modest withdrawal of the present considerable monetary policy stimulus may become appropriate.”
The lack of that wording was widely interpreted to mean that rate hike expectations for next year were essentially dashed. The central bank’s pronouncements are closely watched by economists as a signal of changes in interest rate policies, which can affect currency rates.
“Accordingly, in line with our expectations, it is likely that the BoC adopts a more neutral stance at its upcoming meeting,” wrote Scotiabank chief currency strategist Camilla Sutton in a note.
“The domestic impact is being felt on exports, capital expenditures and employment, but since Canada is viewed as an attractive investment destination capital inflows are pushing up the value of the Canadian dollar,” she added.
The Bank of Canada also issued Monday a quarterly business survey that suggested the corporate sector that is far more concerned about the future than it was only three months ago.
In commodities, December gold bullion rose $8.70 to $1,746.30 an ounce, while TSX gold stocks led gainers. Copper prices were relatively unchanged with the December contact at $3.70 a pound.
Oil prices were slightly higher with the November contract on the New York Mercantile Exchange up 24 cents to $92.09 a barrel.