Forex News – Canadian Dollar falls after Bank of Canada keeps rates unchanged

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The Bank of Canada announced its benchmark interest rate today, holding it unchanged at 1 percent as expected.

In its statement, the central bank signalled that stimulus will continue as the global economy slows down, and it did not mention any need to raise rates in the short term.

The bank’s tone was more dovish in its statement and was darker than many had expected.

The country’s economy will take longer to return to its capacity level as a debt crisis triggers a “brief” European recession and slow U.S. growth reduces demand for exports” the bank said.

“Although Canadian growth rebounded in the third quarter (which ended Sept. 30) with the unwinding of temporary factors, underlying economic momentum has slowed and is expected to remain modest through the middle of next year,” the statement said.

Immediately after the rate announcement, the Canadian dollar weakened. Against its US counterpart, the loonie plummeted from where it was at par, pushing USDCAD up to 1.0133 versus 0.9990.

Below are some comments from analysts:


“Markets are coming to the realization that lower for longer remains the dominant theme for the bank, and it’s pretty much the story over there, and of course the risks in Europe, that’s going to be the dominant theme as well.”


“The market is obviously taking it as fairly dovish. Dollar-Canada has moved significantly higher but I think it is a little less dovish than that. We should have expected that the economic outlook has weakened materially since July, so I don’t see anything that concerning in it. They say that the risks are balanced. I think that’s actually an improvement over last month, where it was clearly very very negative and the headwinds were still rising. Now this to me appears to me to be a statement that highlights a global environment that is concerning and has deteriorated but is stabilizing in some ways. So I would say it is less dovish than what the market is telling us with dollar-Canada having shot up to C$1.0080.”