The Canadian dollar hit an 11-week low against its U.S. counterpart on Thursday, with investors betting that the Bank of Canada would have to cut interest rates further to support a sluggish domestic economy.
The loonie was trading 0.1% lower at 1.3850 per U.S. dollar, or 72.20 U.S. cents, after hitting its lowest level since Aug. 5 at 1.3868.
It is the only Group of 10 currency to lose ground against the U.S. dollar, which has lost some of its recent gains due to falling U.S. bond yields.
The Canadian central bank has reduced its benchmark interest rate by 125 basis points since June, to 3.75%. His easing campaign included a half-percentage-point reduction on Wednesday, the first cut of that magnitude in 15 years outside of the pandemic.
“The Bank of Canada cut its rate by 50 basis points, but it failed to grasp the challenges facing the Canadian economy,” said Adam Button, chief currency analyst at ForexLive.
“The market might look further and say it's not enough. Rates are still too high for the current state of the economy.”
The Bank of Canada's annual economic growth forecasts are too optimistic, economists say, and another significant interest rate cut this year will likely be necessary to boost growth.
Investors are betting that the central bank will cut its benchmark rate by another 100 basis points by September, which would leave it in the middle of the 2.25% to 3.25% range that the central bank considers to be a neutral parameter which neither restricts nor stimulates the economy.
The price of oil, one of Canada's top exports, was down nearly 1% to $70.10 a barrel on concerns that slowing economic growth in Europe could reduce the energy demand.
Canadian bond yields were mixed on a flatter curve, with the 10-year down 3.5 basis points to 3.230%.
