(The Canadian Press) TORONTO – The Canadian dollar was lower Tuesday morning as a host of concerns continue to plague the loonie.
The currency was down 0.38 of a cent to 91.82 cents US.
The loonie ran ahead almost 1/2 a cent on Monday after the Bank of Canada's business outlook survey said there are some positive signs for the economy, but firms remain concerned about weak demand and domestic uncertainty. The bank says sales expectations were supported by improvements in the United States.
The loonie has been pressured recently, pushed to September 2009 levels by a rising trade deficit, a much worse than expected employment report for December and U.S. dollar strength based on the conviction that the Federal Reserve will continue to curtail its massive bond buying program throughout much of this year.
But the central bank's dovish interest rate policy has also helped push the currency lower and traders are looking to next week's interest rate announcement for further clues as to when it might hike rates – or even cut them.
``The market has pared back its expectations for an interest rate cut in Canada over the next 12 months from 38% on Friday to just 21% today,'' observed Camilla Sutton, chief FX strategist and managing director with Scotiabank Global Banking and Markets.
``We do not expect the bank to move towards interest rate cuts in Canada, due to financial stability risks and accordingly do not expect any further interest rate cut risk priced in, which should help to stabilize the Canadian dollar.''