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Forex News: Canadian Dollar Weakens As BoC Holds Rate Steady

Canadian Dollar Weakens As BoC Holds Rate Steady

05/29/2019 - 10:45:00 (RTTNews)

(RTTNews) - The Canadian dollar moved down against its major opponents in the New York session on Wednesday, after the Bank of Canada left its key rate unchanged, saying that the recent economic slowdown was temporary and the growth is expected to pickup in the second quarter.

The BoC maintained the benchmark rate at 1.75 percent, where it has been since October 2018.

The decision was in line with expectations.

The recent data have reinforced Governing Council's view that the slowdown in late 2018 and early 2019 was temporary, the bank said in its accompanying statement.

Hence, the governing council assessed that the degree of accommodation being provided by the current policy interest rate remained appropriate.

Regarding future policy decisions, Governing Council would remain data dependent and assess developments in household spending, oil markets and the global trade environment, it added.

The currency traded mixed against its major counterparts in the European session. While it dropped against the yen and the greenback, it held steady against the aussie. Against the euro, it rose.

The loonie depreciated to 1.3547 against the greenback, its lowest since January 3. The loonie is poised to test support around the 1.37 mark.

The loonie declined to more than a 2-week low of 0.9368 against the aussie from yesterday's closing value of 0.9341. The loonie is seen finding support around the 0.95 region.

The loonie that closed Tuesday's trading at 1.5057 against the euro dropped to a 5-day low of 1.5088. Next key support for the loonie is seen around the 1.52 level.

Figures from the Federal Employment Agency showed that Germany's unemployment climbed sharply in May for the first time in nearly two years, defying expectations for further decline.

The number of unemployed rose by 60,000 month-on-month, while economists had expected a decline of 7,000. In April, there was a fall of 12,000.

The loonie fell to 80.70 against the yen for the first time since January 4. If the loonie drops further, 78.5 is possibly seen as its next support level.

Bank of Japan Governor Haruhiko Kuroda said Japan has difficulty in re-anchoring long-term inflation expectations from inflation below the target level and suggested examining how best to manage inflation expectations within the flexible inflation targeting framework.

Many advanced economies experience very sluggish price development despite significant improvement in economic activity, the banker said. This, in turn, raised concerns about the credibility of inflation targets.

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