The Canadian dollar approached the lowest level in more than a month as a first-quarter economic contraction keeps alive speculation the Bank of Canada will cut interest rates again this year.
The currency fell against all but one of its major peers after Statistics Canada said gross domestic product fell at a 0.6 percent annualized pace, the most since the 2009 recession. The Bank of Canada forecast for flat growth in the quarter. The central bank cut rates in January as “insurance” against collapsing prices of crude oil, Canada’s largest export, while forecasting faster growth in the latter part of the year.
“The market will be ever mindful of activity going forward and if there isn’t any signs of a rebound I think markets will consider the risk of the bank taking out more insurance,” said Jeremy Stretch, the head of currency strategy at Canadian Imperial Bank of Commerce in London. “It risks the market pricing in easier monetary policy and a cheapening in the Canadian dollar.”
The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, fell 0.4 percent to C$1.2480 per U.S. dollar. It touched C$1.2538 Thursday, the lowest level since April 15. One loonie buys 80.13 U.S. cents.
The Bank of Canada held its kept borrowing rate at 0.75 percent on Wednesday, saying consumer demand “is holding up well” and that current stimulus is enough to prevent a downturn.