Canadian Dollar Drops As BoC Cuts Interest Rates

The Canadian dollar declined against its major counterparts in the New York session on Wednesday, as the Bank of Canada lowered interest rates by 25 basis points.

The Bank of Canada reduced its target for the overnight rate to 4.75 percent, with the bank rate at 5.0 percent and the deposit rate at 4.75 percent.

The widely expected decision comes as recent data has increased the Canadian central bank's confidence that inflation will continue to move towards its 2 percent target.

The bank's accompanying statement noted its preferred measures of core inflation has slowed, while three-month measures suggest continued downward momentum.

Nonetheless, the Bank of Canada noted risks to the inflation outlook remain and said its Governing Council is closely watching the evolution of core inflation.

The Governing Council remains particularly focused on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behavior, the bank said.

The loonie reached as low as 0.9115 against the aussie. The currency is likely to face support around the 0.92 region, if it falls again.

The loonie fell to near a 2-week low of 1.3741 against the greenback and more than a 6-month low of 1.4929 against the euro, off its early highs of 1.3665 and 1.4856, respectively. The currency may locate support around 1.39 against the greenback and 1.50 against the euro.

The loonie eased against the yen and was trading at 113.93. The currency is seen finding support around the 108.00 level.