Canadian Dollar Drops as BoC Holds Rate, Cuts Economic Forecast

The Canadian dollar fell today after the Bank of Canada kept the main interest rate unchanged and predicted a slower growth of the nation’s economy, fueling the speculation that the bank will extend the pause on interest rates increases.
The Bank of Canada decided to maintain its key overnight rate at 1 percent. The central bank spoke about its outlook for the economy and it was grim:

The outlook for the Canadian economy has weakened since July, with the significantly less favourable external environment affecting Canada through financial, confidence and trade channels. Although Canadian growth rebounded in the third quarter with the unwinding of temporary factors, underlying economic momentum has slowed and is expected to remain modest through the middle of next year.

The BoC hinted that the improvement of the economy is possible, but only after a period of a slowdown. The bank estimated that the Canadian economy will expand by 2.1 percent in 2011, 1.9 percent in 2012, and 2.9 percent in 2013.
USD/CAD traded at 1.0148 as of 19:36 GMT after it earlier jumped from 1.0028 to 1.0210. EUR/CAD went up from 1.3966 to 1.4123, while CAD/JPY was down from 75.82 to 74.75.

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