Canadian Dollar Weakens As BoC Cuts 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 a quarter point, noting consumer price inflation remains close to 2 percent and the economy is in excess supply.

After cutting rates by 50 basis points at each of its two previous meetings, the BoC decided to lower the overnight rate by 25 basis points to 3 percent, with the Bank Rate at 3.25 percent and the deposit rate at 2.95 percent.

"Lower interest rates are boosting household spending and, in the outlook published today, the economy is expected to strengthen gradually and inflation to stay close to target," the Bank of Canada said. "However, if broad-based and significant tariffs were imposed, the resilience of Canada's economy would be tested."

The bank added, "We will be following developments closely and assessing the implications for economic activity, inflation and monetary policy in Canada."

The Canadian central bank also said it expects consumer price inflation will be around the 2 percent target over the next two years.

The loonie fell to a 2-day low of 107.27 against the yen. The currency is likely to locate support around the 104.00 level.

The loonie retreated to 1.5061 against the euro and 0.9006 against the aussie, from an early high of 1.4996 and a 1-week high of 0.8970, respectively. The currency may challenge support around 1.52 against the euro and 0.91 against the aussie.

The loonie remained lower against the greenback, at an 8-day low of 1.4471. The next possible support for the currency is seen around the 1.47 level.