The Canadian Dollar held close to a 4-year trough versus its North American counterpart, the U.S. Dollar, following comments made by officials at the Bank of Canada which seemed to suggest that monetary policy there is headed for a significant change. According to Stephen Poloz, the BOC Governor, the too strong Loonie has been a bane to growth for the Canadian economy and that depreciation of the Canadian Dollar will be a welcome change, thus there is a strong possibility that easing is on the horizon. In direct contrast, Mark Carney, the former head of the BOC and now the current governor of the Bank of England, is likely to be considering a rate increase.
As reported at 12:01 p.m. (JST) in Tokyo, the USD/CAD traded at C$1.1086, recovering from an earlier drop to C$1.1092; thus far in 2014, the Loonie has lost 4% of its value relative to the greenback, adding to the 7% drop in 2013. The GBP/CAD was trading 1.8% higher at C$1.8385, a level not seen in more than four years, before dropping back to C$1.8450.
Reserve Bank of Australia Plays Role Model for BOC
The Bank of Canada’s complaints of a too strong Loonie and its willingness to allow the Canadian Dollar to depreciate in order to rebalance the economy might appear similar to a similar ploy enacted last year by the Reserve Bank of Australia. Since then, the Aussie has lost nearly 14% of its value and analysts say that it is currently situated at a could level from which to build.