The Canadian dollar weakened against its US counterpart today after crude oil declined, but the speculation that Canada’s central bank will raise the interest rates before the European Central Bank allowed the Canadian currency to erase the losses versus the euro.
The loonie strengthened at the beginning of today’s trading session as crude oil, the key export of Canada, advanced after the report that China’s imports surged 51 percent last month. Futures on crude oil rose 1.1 percent to $86.52 per barrel in New York. Later crude declined 0.9 percent to $84.78 per barrel. Commodity market still looks supportive for the Canadian dollar, which is considered to be the commodity currency. The Standard & Poorâs/TSX Composite Index rose 1.1 percent.
The BoC kept its benchmark interest rates unchanged at 1 percent in January. The ECB also left its benchmark at the same 1 percent level. Governor of Canada’s central bank Mark Carney indicated “the persistent strength in the Canadian dollar and Canadaâs poor relative productivity performance” as the threats to Canada’s economy. Despite these threats Carney was rather optimistic about the future of the country’s economy and predicted that “the economy will return to full capacity by the end of 2012”. The optimism about the Canadian economy caused the speculation among the investors that Canada will be able to raise the interest rates before the European Union.
USD/CAD rose today from 0.9870 to 0.9889 as of 23:28 GMT after dropping to 0.9847 earlier. EUR/CAD opened at 1.3341, fell to 1.3263, but later rebounded to 1.3336.
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