BOC to Keep Interest Rate, Loonie Rises

By TraderVox.com

Tradervox (Dublin) – The Canadian dollar is among the biggest movers today as it rose 1.4 percent against the yen. It strengthened against the Euro forcing the EUR/CAD to drop by 1.04 percent. The loonie advanced against the Aussie by 0.81 percent and against the US dollar by 1.03 percent. The gain in the Canadian dollar increased by after the BOC decided to leave the rate unchanged at 1 percent. In another report, manufacturing shipments in Canada dropped by 0.3 percent less than it had been expected. New motor vehicles MoM contracted by6.7 percent which is worse than expected.

The USD/CAD cross plummeted to 0.9900 after the report from the BOC. The pair had gone as low as 0.9896 which is a two week low. On the report by the Bank of Canada, policy makers said that higher borrowing costs would become appropriate since the economic growth and inflation will be faster than they had forecasted.

According to Shaun Osborne of Toronto-Dominion Bank, expectations of an earlier exit from the prolonged monetary policy are creeping in and rates might change in late 2012 or early 2013. He also indicated that there is a hawkish bias towards the headlines. The rise in the Canadian dollar is the strongest in two months. On April 2, Mark Carney, the Bank of Canada Governor, indicated that the economy had been stronger than expected while the inflation was higher. This caused the loonie to increase against most currencies. The Governor is expected to hold a press conference tomorrow as he releases a detailed quarterly economic forecast. The loonie increased against the dollar to trade at 99.13 cents per UD dollar in the early morning in Toronto.

The BOC also raised its growth forecast for the year from 2 percent to 2.4 percent but lowered the 2013 forecast to 2.4 from 2.8 it had previously given. The BOC Governor said in a statement that the exit from the current monetary policy will be weighed carefully against global and domestic economic developments.

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