Skip to main content

The Globe and Mail

Loonie ends lower ahead of Bank of Canada’s rate announcement

A Canadian dollar.

Kevin Van Paassen/The Globe and Mail

The Canadian dollar fell Tuesday, a day before the Bank of Canada makes its latest announcement on interest rates.

The loonie closed off 0.18 of a cent at 91.14 cents (U.S.).

Few expect the central bank to announce a change in its trend-setting rate Wednesday, but investors will be keen to see what hints, if any, it gives about the future direction of interest rates.

Story continues below advertisement

The Canadian dollar has been falling recently amid the bank's dovish tone on rates, along with disappointing trade and employment data.

Meanwhile, the greenback has gained strength on an improving economy south of the border and a decision by the U.S. Federal Reserve to cut its bond purchases by $10-billion a month to $75-billion.

"I'm trying to think of factors where the loonie will move back up and I can't think of them," said Ian Nakamoto, director of research for 3MACS.

"The U.S. economy is growing at a stronger pace than Canada and they are doing away with stimulus and we're sort of neutral," he said.

"In many ways, even the [Bank of Canada] and [Finance Minister Jim] Flaherty, they don't mind a weaker Canadian dollar because the economy has got to get going here."

A weaker dollar tends to make Canadian exports more competitive.

It has been a tough month so far for the loonie, which is down more than 2.5 cents from the end of 2013, falling near levels that haven't been seen in more than four years.

Story continues below advertisement

Markets had been uneasy on Monday with data suggesting that China's fourth-quarter growth declined slightly as the world's second-largest economy reported that its annualized growth rate was 7.7 per cent in the fourth quarter, down from the previous quarter's 7.8 per cent.

Confidence rebounded after the Chinese central bank promised to inject extra liquidity into its financial system.

The February crude oil contract moved up 62 cents to $94.99 a barrel, while March copper was ahead a penny at $3.35 a pound.

However, gold took back some of Monday's gains as February bullion dropped $10.10 to $1,241.80 an ounce on the New York Mercantile Exchange.

Report an error
Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨