Loonie dips for third day in a row
The Canadian dollar sold off for a third day on Friday amid data showing that inflation is even more tame than expected, leaving the Bank of Canada plenty of room to delay the next interest rate hike.
The currency tumbled 0.6 of a cent lower to 99.11 cents US, its lowest level since late July, 2012 as Statistics Canada said that Canada's annual inflation rate was 0.8 per cent in December, the same as in November.
On a month-to-month basis, consumer prices dipped 0.6 per cent from November, more than economists expected. Prices on a number of key items fell in December from the previous month, including gasoline, automobiles and clothing.
The dollar has been under pressure since the Bank of Canada indicated Wednesday that it will be slower to raise interest rates than had been expected because of economic weakness.
The dollar been supported in recent months partly on sentiment that the central bank could hike rates as early as later this year. The low inflation suggests interest-seeking investors have to wait longer for the central bank to move.
"The low-low inflation result will simply put additional near-term downward pressure on an already sagging Canadian dollar, as it pounds home the rather obvious point that the BoC is going nowhere fast," said BMO Capital Markets deputy chief economist Douglas Porter.
Recent optimism about improving economies in the U.S. and China had earlier supported an upswing in oil prices. The U.S. housing and jobs markets have shown improvement, while China's manufacturing output has been gaining steam.
But by late morning, the March crude contract on the New York Mercantile Exchange had shed 19 cents to US$95.76 a barrel.
February bullion on the Nymex declined $8.90 to US$1,661 an ounce while March copper was three cents lower at US$3.65 a pound.
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