Canadian Dollar Fluctuates Before Central Bank Update
The Canadian dollar fluctuated against its U.S. counterpart before the Bank of Canada announces an interest-rate decision and may revise its economic growth forecast.
The central bank is forecast to maintain its benchmark interest rate at 1 percent, according to all 27 economists surveyed by Bloomberg. So-called risk reversals show options traders are paying the most for protection against loonie weakness since Nov. 26. The three-month 25-delta risk reversal rate rose to 0.90 percentage point from 0.88 percentage point yesterday.
“The growth numbers for the fourth quarter give us a weaker hand over to 2013, the growth numbers the bank have been discounting in terms of annual growth, look too high,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce, by phone from London. “The greater the downgrade, the further the closing of the output gap is pushed and the greater the risk the CAD takes a little bit of a downside bias.”
The loonie, as the Canadian dollar is known for the picture of the aquatic bird on the C$1 coin, was little changed at 99.17 cents per U.S. dollar at 8:17 a.m. in Toronto. One loonie buys $1.0084.
Canada’s benchmark 10-year bonds rose, pushing the yield down two basis points, or 0.02 percentage point, to 1.89 percent. The 2.75 percent note maturing in June 2022 added 13 cents to C$107.29.
The Bank of Canada will announce further details tomorrow for a Jan. 30 10-year note auction.
The loonie has fallen 1.8 percent during the past six months versus nine developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes. The euro has gained 6 percent while the greenback has dropped 4.7 percent.
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