Canadian forex review: C$ eases with BoC announcement

By Commodity News Service Canada

WINNIPEG, July 17 – The Canadian dollar eased against its US counterpart on Wednesday, undermined by a bearish Bank of Canada interest rate announcement, analysts said.

Bank of Canada governor, Stephen Poloz, announced Wednesday that the bank plans to keep interest rates unchanged, and will continue to do so until the economy shows more recovery.

The Canadian currency was quoted at US$0.9602, or US$1=C$1.0414 at the close on Wednesday, which compares with Tuesday’s North American close of US$0.9647, or US$=C$1.0366.

Sharp losses in gold and weakness in copper prices also contributed to some of the softness in the value of the Canadian dollar. However, strength in crude oil limited its downside potential.

An announcement from the US Federal Reserve was also part of the focus in financial markets on Wednesday. US Federal Reserve Chairman, Ben Bernanke, announced that stimulus programs could be reduced if the economy continues to grow. But, more progress needs to be made to make that decision.

Canadian bonds closed higher, reacting to the Bank of Canada’s announcement to keep interest rates unchanged, market watchers said.

The two-year bond yielded 1.087% late Wednesday, from 1.121% late Tuesday. The 10-year bond yielded 2.375%, from 2.405%. Bond yields fall as their prices rise.