The Canadian dollar closed lower Thursday, adding to the steep declines of the previous session after the Bank of Canada indicated that interest rate hikes are further away than previously thought.
The loonie fell 0.38 of a cent to 95.92 cents (U.S.) after tumbling almost nine-tenths of a cent Wednesday as the central bank also revised downward its economic forecast through 2015.
The central bank dropped its bias to tighten interest rates to a neutral stance on Wednesday, persuading many that the bank won’t raise its key rate from 1 per cent until 2015. Previously, many analysts had thought the bank would boost rates in the fourth quarter of 2014.
“The bias became untenable in the face of the larger degree of slack evident in the economy,” said Mark Chandler, head of Canadian FIC strategy at RBC Dominion Securities.
Markets also digested positive news from the world’s second-biggest economy – an HSBC survey showing that China’s manufacturing activity was higher than expected in October.
HSBC’s main index rose to a seven-month high of 50.9 points from 50.2 per cent in September – anything above 50 indicates expansion. The consensus in markets had been for a more modest rise to 50.4.
The manufacturing data was released a day after markets were pressured by concerns over China’s banking sector, mainly due to a hot real estate market that could prompt a tightening in monetary policy.
The Chinese data helped lift December crude on the New York Mercantile Exchange 25 cents to $97.11 a barrel.
Copper prices were unchanged at $3.26 a pound after sliding 7 cents Wednesday. Gold bullion rose, with the December contract ahead $16.30 to $1,350.30 an ounce.