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Forex News: Canadian Dollar Falls On Growth Worries

Canadian Dollar Falls On Growth Worries

09/08/2021 - 11:12:00 (RTTNews)

(RTTNews) - The Canadian dollar weakened against its major counterparts in the New York session on Wednesday, as risk sentiment dampened on concerns that the spread of the Delta variant of coronavirus will derail economic recovery.

Uncertainty over the tapering of the bond purchase program by the U.S. Federal Reserve also weighed.

The Bank of Canada left its interest rate and the size of its quantitative easing program unchanged and pledged to hold the policy rate at the effective lower bound until inflation target is met.

The BOC maintained its benchmark rate at 0.25 percent, as expected.

The quantitative easing program was retained at a target pace of $2 billion per week.

The central bank noted that the Canadian economy still has considerable excess capacity and the recovery continues to require extraordinary monetary policy support.

The BOC remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. According to the July projection, this is expected to happen in the second half of 2022.

The Governing Council indicated that decisions about future adjustments to the pace of net bond purchases will be guided by its ongoing assessment of the strength and durability of the recovery.

The loonie declined to more than 2-week lows of 86.46 against the yen and 1.2762 against the greenback, off its prior highs of 87.35 and 1.2626, respectively. The next likely support for the currency is seen around 84.00 against the yen and 1.29 against the greenback.

The loonie reversed from its early highs of 1.4944 against the euro and 0.9322 against the aussie, touching nearly a 3-week low of 1.5063 and a 1-1/2-month low of 0.9375, respectively. Next key support for the currency is found near 1.52 against the euro and 0.95 against the aussie.

Looking ahead, U.S. consumer credit for July will be featured in the New York session.

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