Published: 23 Oct at 5 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, Canadian Dollar, Australia, USA, Canada, China,
Before the local session opened the Canadian Dollar edged further away from yesterdayâ€™s four-week high against the US Dollar.
In a reversal of fortunes, the â€˜Loonieâ€™ slumped to its lowest level against the US Dollar for a week as borrowing costs for China
â€™s banks increased significantly and Chinese stocks tumbled.
The Canadian Dollarâ€™s immediate reaction to the development prompted this response from currency strategist Jane Foley; â€˜Weâ€™ve seen the Dollar rise generally from Asian hours, which [...] I think is related to fear China could be hiking interest rates again and thatâ€™s coming through into demand for safe haven, into the Dollar, into the Yen, and hitting commodity currencies. Canadian Dollar perhaps softer going into the [Bank of Canada
] meeting on this Chinese news [...] The degree of the impact of the shutdown on US growth will clearly have ramifications for Canada. Itâ€™s clear that it will be a concern for the Bank of Canada.â€™
After the Bank of Canada delivered its rate decision the â€˜Loonieâ€™ extended declines against the majority of its most traded rivals.
As forecast by economists, policy makers held the benchmark rate at 1 per cent.
The central bank cut its domestic growth forecast for the year from 1.8 per cent to 1.6 per cent with next yearâ€™s outlook also being lowered from 2.7 per cent to 2.3 per cent.
The BOC now expects inflation to remain below the 2 per cent target until the close of 2015, six months longer than predicted earlier this year.
Forex strategist Charles St-Arnaud said this of the BOC decision; â€˜Finally, the Bank of Canada is catching up with reality. The new growth forecasts brings them in line with what the International Monetary Fund had in October. A correction in the Canadian Dollar was needed, and this will help us get there.â€™
The Canadian Dollar dropped 1 per cent against the â€˜Greenbackâ€™ during local trading, its largest daily drop since June. The commodity-driven asset also posted notable declines against the Euro put managed to hold fairly steady against a broadly softening Pound.
The CAD/USD pairing is currently trading in the region of 0.9632
In other currency news, the Euro advanced on the Pound as data showed that Spain
edged out of recession and consumer confidence in the Eurozone increased.
With positive news emerging from the 17-nation currency bloc and UK GDP data due for release on Friday the Euro is close to a 7-week high, trading at 0.8523 against Sterling.
As of Wednesday, 23rd October 2013, the Pound Sterling currency rates mentioned within this news item were as follows:
GBP EUR exchange rate was 1.1734, GBP USD exchange rate was 1.6165, GBP AUD exchange rate was 1.6791, GBP CAD exchange rate was 1.6782, and GBP CNY exchange rate was 9.8338.