The Canadian dollar fell today on the uncertainty about the future increases of the interest rates as the central bank suggested that it’ll be cautious to increase the rates after it raised the target rate today.
The Bank of Canada raised its target rate for the overnight loans between the banks from the record low level of 0.25 percent to 0.50 percent. Canada is the first nation from the Group of Seven to perform such move since the global recession in the last year. The central bank said in its press release:
Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.
This statement is more dovish than was expected and suggests that the interest rates will remain at the current level for some time. Yet, when troubles in Europe will go away, causing the investor’ sentiment turn away from the risk aversion, the favorable fundamentals should help the Canadian currency to outperform.
USD/CAD rose to 1.0485 today as of 18:47 GMT from its opening level of 1.0441. EUR/CAD rose to about 1.2867.
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