Forex News – Canadian dollar steady after BOC holds interest rates at 1 percent

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The Canadian dollar held firm after the Bank Of Canada announced it kept its key interest rate unchanged at 1 percent on Tuesday.

This overnight rate has been kept at such lows since September 2010. BOC governor Mark Carney has decided to prolong the period of low rates in an effort to counter economic risks posed by Europe’s sovereign- debt crisis.

Speculation is that the central bank will not raise rates until next year as there are still issues in Europe and the global economic recovery has been sluggish. Also Canadian households have been constrained by record debts. The Canadian economy is still struggling with rising unemployment and sluggish exports. The BOC forecast Canada’s gross domestic product growth will slow to 1.9 percent this year from 2.1 percent in 2011.

Carney, who will hold a press conference tomorrow after releasing a Monetary Policy Report with a detailed economic growth forecast he may foreshadow today.

The Canadian dollar jumped against the euro after the news at 14:00 GMT, with EURCAD tumbling to 1.2893 from an earlier high of 1.2975.

Against the US dollar, the loonie hovers near its highest level this year, with USDCAD falling to  1.0125 on the news.