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Canadian Dollar Continues Long Descent

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Canadian Dollar Continues Long Descent

The Canadian dollar was weaker Thursday, spiralling to a four-and-a-half year low versus the greenback amid positive Canadian retail sales data.

Positive retail revenues failed to stop the loonie’s magnificent freefall, as the forex market continued to load-up on US dollars ahead of next week’s Federal Open Market Committee policy meetings. Canadian retail sales rose 0.6 percent in November, following a decline of 0.1 percent the prior month. Retail sales excluding automobiles edged up 0.4 percent. Economists polled by Bloomberg called for a gain of 0.6 percent and 0.3 percent, respectively.

The loonie fell 29 pips to 0.8988 CAD in North America’s morning session, bouncing from a low of 0.8951. The Canadian dollar has shed more than 1.6 percent since Friday and nearly 3 percent since the start of the year. The loonie is trading around 9.5 percent below its January 2013 rate.

The Bank of Canada’s mid-week interest rate vote precipitated the loonie’s freefall. Opting to leave the overnight lending rate unchanged at 1 percent, the BOC stressed concerns over weak inflation, which is “now expected to be lower than previously anticipated for most of the projected period,” according to the BOC’s official statement.

Meanwhile, forex traders were seemingly unaffected by lousy US manufacturing output. The US manufacturing economy stalled in January, as extreme weather courtesy of the ‘Polar Vortex’ kept production at a stand-still. Markit Group’s manufacturing PMI fell from 55.0 to 53.7, a three-month low.

The ‘Polar Vortex’ also gripped southern Ontario, Canada’s main economic hub. The effects of a severe winter (even by Canadian standards) are likely to be reflected in future Statistics Canada data releases.

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