Bank of Canada Takes Measures to Force Loonie Down

aAfter trading once again near parity with its U.S. counterpart, the Canadian dollar witnessed a significant fall today as the national central bank stated that a strong currency will cause problems and slow down the economic recovery in the country, shunning investors from Canada, at least, temporarily.

Bank of Canada held its overnight rates at 0.25 percent as most of economic analysts were expecting, but the tone of policy makers declarations was the main driver for a bearish day for the Canadian dollar, as, according to central bankers, a strong currency in Canada will impact directly and significantly the economic recovery in the country, forcing the loonie down versus most of 16 main traded currencies in foreign-exchange markets this Tuesday, as a number of traders are already expecting more effective measures from the Canadian central bank to halt its currency rally.

After trading at the highest level since July 2008, the loonie’s rally become an evident reason of concern for Canadian economic recovery, according to analysts. From now on, a dispute is likely to take place, as demand for Canadian commodities rise, forcing the loonie up, the national central bank is likely to find policies to halt the currency’s gains, as it will certainly slow down the recovery in the country.

USD/CAD traded at 1.0400 as of 13:42 GMT from a previous rate of 1.0280 yesterday. CAD/JPY traded at 86.88 as of 13:43 GMT from 88.25.