The Canadian dollar touched a low of 90.06 cents vs the U.S. dollar in trading today primarily because the Bank of Canada kept the Bank Rate unchanged. This, combined with signs of sluggish economic growth and a jump in unemployment, was enough for foreign investors to begin focusing away from Canada.
Bloomberg News even ran a story today about how Canada had lost the “haven” status that it had acquired after the Global Credit Crisis and Great Recession in 2008-2009.
There is also speculation that the Governor of the Bank of Canada, Stephen Poloz, is rather happy with the direction of the Loonie as this will help the primarily Eastern Canada-based manufacturing exporters. He was once the President of Export Development Canada. This might be an indication of where his heart is.
It also appears that he is not immediately sympathetic with the plight of cross-border shoppers or Canadians that might be looking to buy property down in the Sunbelt of the U.S. The fall in the Loonie will also sting foreigners who have bought Canadian real estate over the past few years.
Also, in a bit of a contradiction, he said that he was increasingly concerned about inflation in Canada. Well, one of the quickest ways to increase the risk of inflation is to let your currency devalue. The cost of all imports will rise in that scenario, which sounds a lot like inflation to me.
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