Canadian dollar slips

Canada's dollar fell against the US currency on Friday as investor thirst for risk waned and soft domestic inflation data underpinned expectations the Bank of Canada will keep rates steady through mid-2010. North American equity markets, typically a barometer of risk, notched a lackluster performance on disappointing results from conglomerate General Electric and Bank of America Corp.
Data also showed Canadian consumer prices fell in September from a year earlier, thanks largely to tumbling gasoline prices. While there was other evidence of emerging inflation pressures, it was not expected to be of concern to the Bank of Canada. The economic reading is expected to permit the central bank to hold interest rates steady next Tuesday and repeat its conditional pledge to leave them unchanged at 0.25 percent through mid-2010.
"Looking at those CPI figures and looking at the strength in the currency, it reinforces the view that the Bank of Canada will maintain an accommodative monetary policy stance longer than some other countries," said Andrew Pyle, wealth adviser at Scotia McLeod. Most of Canada's primary dealers forecast on Friday the central bank is likely to stick to its pledge to keep its benchmark interest rate at its current near-zero level through the second quarter of next year.
Market watchers expect the central bank to highlight the currency's spike of some 26 percent since hitting a four-year low in early March. This week, the Canadian dollar zoomed to a 14-month high.
"There's some concern the Bank of Canada may ramp up some of its jaw-boning of the Canadian dollar due to the threat of economic recovery. You might have some traders getting out of the currency on that basis," said Sal Guatieri, senior economist at BMO Capital Markets.
After the domestic inflation numbers, the Canadian unit dropped as low as C$1.0436 to the US dollar, or 95.82 US cents, compared with around C$1.0334 to the US dollar, or 96.77 US cents, just before the data. The currency finished at C$1.0382 to the US dollar, or 96.32 US cents, down from C$1.0345 to the US dollar, or 96.67 US cents, at Thursday's close.