Tags: canada | dollar | inflation | currency

Canada Dollar Weakens as Inflation Trails Central Bank's Target

Friday, 22 Nov 2013 10:42 AM

The Canadian dollar fell for a second day after the consumer price index dropped below the Bank of Canada’s target, bolstering the case for the nation’s central bank to keep interest rates on hold.

The currency dropped against most major peers, trading at almost a four-month low against the U.S. dollar. Bank of Canada Governor Stephen Poloz said last month the risk of inflation sinking below policy makers’ 1 percent-to-3 percent band led him to signal on Oct. 23 that the next move in rates wouldn’t necessarily be higher.

“Lower CPI certainly feeds on the market view right now that the economy is lagging a little bit behind, and it would put out rate hikes that much further,” Don Mikolich, executive director of foreign-exchange sales at Canadian Imperial Bank of Commerce, said by phone from Toronto before the report. “Anything where CPI is below expectations will be seen negatively, and it’s less likely for people to go buy and hold Canadian dollars.”

The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, weakened 0.2 percent to C$1.0539 per U.S. dollar at 8:33 a.m. in Toronto. It reached C$1.0569 earlier, the weakest level since July 9.

The central bank has held its benchmark interest rate at 1 percent since 2010 to support the economy.

Canada’s annual inflation rate slowed to 0.7 percent in October from a year earlier, lagging behind economist forecasts for an 0.8 percent rate, from 1.1 percent in September. The core inflation rate, which excludes eight volatile products, decelerated to 1.2 percent from 1.3 percent, Statistics Canada said today from Ottawa, matching economist forecasts.

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The Canadian dollar fell for a second day after the consumer price index dropped below the Bank of Canada's target, bolstering the case for the nation's central bank to keep interest rates on hold.
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2013-42-22
Friday, 22 Nov 2013 10:42 AM
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