The Canadian dollar fell to an almost 10-week low versus its U.S. counterpart as the Bank of Canada’s reduced growth forecast and less emphasis on raising interest rates weighed on investor optimism about the economy.
The currency traded weaker than parity for a second day after the central bank cut its forecast for growth this year to 2 percent from an October forecast of 2.3 percent.
“It should hover around parity,” David Doyle, a strategist at Macquarie Capital Markets, said in a telephone interview from Toronto. “In the long run it’s likely that the Bank of Canada will be forced to raise interest rates in front of an announcement by the Federal Reserve.”
Canada’s currency, nicknamed the loonie for the image of the aquatic bird on the $1 coin, depreciated 0.4 percent to $1.0024 per U.S. dollar at 4 p.m. in Toronto, after reaching its weakest level since Nov. 16. One Canadian dollar purchases 99.76 U.S. cents. Falling below parity with the U.S. dollar is a negative psychological marker for many Canadians who travel to the U.S. to shop.