Loonie down, BoC leaves rates unchanged
A Canadian dollar coin, or loonie, and an American dollar are balanced on a scale in Quebec City, on April 7, 2010. THE CANADIAN PRESS/Jacques Boissinot
TORONTO - The Canadian dollar was lower Wednesday morning as the Bank of Canada left its key interest rate unchanged.
The loonie fell 0.27 of a cent to 92.68 cents US as the central bank said it would keep the rate at one per cent, where it's been for almost four years as the global economy recovers from the severe economic slowdown that followed the 2008 financial collapse.
Inflation has been running around the two per cent level, raising speculation that the bank could move to raise rates sooner than expected. But the bank doesn't expect increasing price pressure, saying the recent rise is mainly due to temporary factors and expects inflation to fluctuate around that two per cent level.
The bank added that "economic activity in Canada is now projected to be a little weaker than previously forecast."
However, "the Bank still expects that the lower Canadian dollar and a projected strengthening in global demand will lead to a pickup in Canadian exports and business investment and, eventually, a more sustainable growth track."
Elsewhere on the economic front, data out Wednesday showed that manufacturing sales were up in May for a fourth increase in five months. Statistics Canada says sales rose 1.6 per cent to $51.6 billion. Sales rose in 11 of 21 industries, representing about 61 per cent of the manufacturing sector. The agency says the gain was largely due to higher sales in the petroleum and coal product and motor vehicle industries.
Other data showed that Chinese economic growth rose to 7.5 per cent over a year earlier in the three months ended June 30 from the previous quarter’s 7.4 per cent.
The report was in line with the ruling Communist Party's 7.5 per cent target for the year, higher than expectations for a 7.4 per cent advance. Analysts say Chinese leaders are willing to accept even slower growth so long as the economy generates enough new jobs to prevent unrest.
"Today's numbers should further allay fears of a sharp near-term downshift in the economy's performance," said Peter Buchanan, senior economist at CIBC World Markets.
"We continue to look for GDP growth this year to come in at or slightly above the current official 7.5 per cent target."
On the commodities market, August crude gained 82 cents to US$100.80 a barrel.
August bullion edged up $4.10 to US$1,301.20 an ounce while September copper was unchanged at Us$3.25 a pound.