TORONTO – The Canadian dollar closed with little change Tuesday amid certainty that the Bank of Canada will keep its key interest rates unaltered at the next setting.
The loonie was down 0.02 of a cent to 97.28 cents US.
Analysts are unanimous in predicting the central bank will leave its key rate at one per cent on Wednesday. And in view of persistent economic weakness, no hikes are likely for the foreseeable future.
“The combination of softer inflation, slower growth and an awkward growth handoff (away from consumption towards net-trade) should work to extend the timing before the economy sees monetary stimulus removed,” said Ian Pollick, Fixed Income Strategist at RBC Dominion Securities.
The Canadian dollar has lost almost three cents since the last Bank of Canada rate announcement in late January, at which time the bank signalled it was in no hurry to raise rates while cutting three-tenths of a point off its projections for growth for both 2012 and 2013, to 1.9 per cent and 2.0 per cent respectively.
But that could be revised lower, given data released Friday showing fourth quarter growth came in at an annualized rate of 0.6 per cent, with growth actually contracting during December.
Economists don’t expect the currency to regain a foothold above parity until later this year and point out that the Canadian housing sector is becoming an increasing worry to investors.
“However we see housing drivers, like interest rates, immigration, employment and commodities, as supporting only a moderation in housing, not a collapse and that this in turn should prove positive for the Canadian backdrop,” said Scotia Capital chief currency strategist Camilla Sutton.
The commodity-sensitive Canadian dollar failed to find support from higher prices for oil and metals.
The April crude contract on the New York Mercantile Exchange ahead 70 cents to US$90.82 a barrel
May copper on the Nymex rose one cent to US$3.51 while April gold climbed $2.50 to US$1,574.90 an ounce.
Commodities rose amid reassurances that China will stick to its economic growth target for the year.
Premier Wen Jiabao told the ruling Communist Party’s annual congress that the government would spend what it needs to meet the economic growth target of 7.5 per cent that is part of the government’s latest five-year development plan.