Canadian Dollar Extends Decline After BoC Rate Cut

The Canadian dollar extended decline against its major counterparts in the New York session on Wednesday, as the Bank of Canada reduced its key policy rate further amid easing inflationary pressures.

The BoC said it has reduced its target for the overnight rate by 25 basis points to 4.5 percent, with the bank rate at 4.75 percent and the deposit rate at 4.5 percent.

The Canadian central bank said the decision to lower rates for the second straight meeting came as broad price pressures continue to ease and inflation is expected to move closer to 2 percent.

The Bank of Canada also said consumer price inflation is expected to come down below core inflation in the second half of this year, largely because of base year effects on gasoline prices.

At the same time, the Canadian central bank noted price pressures in some important parts of the economy—notably shelter and some other services—are holding inflation up.

The Bank of Canada said its Governing Council is carefully assessing these opposing forces on inflation and noted future monetary policy decisions will be guided by incoming information and their assessment of their implications for the inflation outlook.

The loonie dropped to more than an 8-month low of 1.4998 against the euro and more than 3-month lows of 1.3808 against the greenback and 110.94 against the yen, off its early highs of 1.4933, 1.3778 and 113.17, respectively.

Against the aussie, the loonie retreated to 0.9113, from an early 4-week high of 0.9083.

The loonie is likely to challenge support around 1.51 against the euro, 1.39 against the greenback, 107.5 against the yen and 0.93 against the aussie.