Loonie lower before BOC rate notice
Oct 22, 2012 / 8:12 am
TORONTO - The Canadian dollar was slightly lower a day before the Bank of Canada makes its next announcement on interest rates.
The loonie was down 0.11 of a cent to 100.57 cents US.
There isn't any doubt about what the Canadian central bank will do about interest rates â€” it's widely expected the bank will leave its key rate unchanged at one per cent.
But there is speculation about what the bank will have to say about raising rates in the future. And that means its statement Tuesday morning will be carefully scrutinized for small changes in wording.
"After Governor Carneyâ€™s dovish speech on October 15th, markets are increasingly pricing in the risk that the bank shifts from hawkish to neutral by omitting the reference that 'some modest withdrawal of the present considerable monetary policy stimulus may become appropriate'," said Scotia Capital chief currency strategist Camilla Sutton.
Traders also digested an announcement Friday that the federal government has rejected a Malaysian state-owned energy giant's proposed takeover bid for Calgary-based natural gas producer Progress Energy Resources (TSX:PRQ). Petronas had offered $6 billion for Progress, but Industry Minister Christian Paradis said he was "not satisfied that the proposed investment is likely to be of net benefit to Canada."
Some analysts thought this didn't bode well for other acquisitions by state owned energy companies.
"The recent rejection of the Petronas acquisition of Progress is a negative signal for foreign takeovers," said Rahim Madhavji at Knightsbridge Foreign Exchange in Toronto.
"Generally, these foreign takeovers are loonie positive as a large chunk of loonies need to be bought for the deal."
The commodity-sensitive loonie failed to find support from higher oil prices as crude advanced amid another round of fears of instability in the Middle East after Lebanonâ€™s intelligence chief, Brig. Gen. Wissam al-Hassan, was assassinated in a massive car bombing on Friday. He was a powerful opponent of Syria, leading analysts to observe that Syria, engulfed in a civil war, might be trying to pull other nations into the conflict.
The December crude contract on the New York Mercantile Exchange gained 23 cents to US$90.28 as barrel.
December bullion gained $1.60 to US$1,725.60 an ounce while December copper was unchanged at US$3.64 a pound after sliding 10 cents on Friday.
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