Loonie looses Steam on BoC Governor’s Comments

Tuesday, October 27, 2009, 09:19 GMT

Recent warnings issued by Mark Carney (Governor, Bank of Canada) that the Loonie has strengthened too much and it may hurt the nation’s economic recovery, due to the tumbling crude and stocks, have resulted in it losing ground against 14 of its 16 counterparts as it is trading near C$1.0694, near a 3-week low. Loonie has gained as much as 19% this year but has lost ground by 3.5% since the central bank policy makers’ last meeting on 20^th Oct.

Stronger currency will drag the country’s economy into a further recession by hindering growth, thereby dragging the inflation further down despite the fact that the central bank of Canada has revised its Loonie estimates to 96 US cents from 87 US cents for the year 2011. Low interest rates and weakness in crude are the major factors for the currency weakness. The Loonie has further depreciated after the CPI fell for the fourth consecutive month in September to -0.9% which is noticeably the longest running series since the early 50’s.