[TORONTO] Canada's dollar slid to the weakest level in almost six years as the central bank unexpectedly cut interest rates amid a slump in crude oil.
The currency fell against all 31 of its major peers as the Bank of Canada cut economic forecasts and lowered the benchmark rate target to 0.75 per cent, from one per cent, where it's been since 2010. A survey last week showed economists pushed projections for an increase into next year. Crude, the country's largest export, has tumbled more than 50 per cent since June amid a global glut.
"They are taking pre-emptive steps," Thomas Costerg, an economist at Standard Chartered Bank, said in a phone interview from New York.
"If oil prices remain under pressure, you could potentially see further cuts. This was not expected, and it's going to put pressure on the loonie."
The currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, depreciated 1.3 per cent to C$1.2274 per US dollar at 10:15am Toronto time. It touched C$1.2296, the weakest since April 2009.
None of the 22 economists in a Bloomberg News survey predicted the cut. The interest rate, which influences everything from car loans to mortgages, had been at one per cent since September 2010. The last reduction was in April 2009.
The central bank reduced its growth forecast for the first half of this year to a 1.5 per cent annualized pace, from an October estimate of 2.4 per cent. Inflation will slow to 0.3 per cent in the second quarter, outside the central bank's target range of one per cent to 3 per cent, the bank projected.