Canada's dollar dropped against the 16 most-active currencies on concern a slowing economy will prompt the central bank to lower borrowing costs on June 10. Canada's economy unexpectedly shrank in the first quarter.
Canada's dollar declined 0.5 percent to C$1.0142 per U.S. dollar at 12:47 p.m. in Toronto, from C$1.0090 yesterday. It touched C$1.0151, the weakest since May 9. The Canadian dollar has fallen 1.6 percent so far this year versus its U.S. counterpart. One Canadian dollar buys 98.61 U.S. cents.
The loonie, as the currency is known because of the image of the bird on the one-dollar coin, has traded near parity with its U.S. counterpart this year after climbing 17 percent in 2007. It touched a 2008 low of C$1.0379 on Jan. 22, and a high of 97.12 cents per U.S. dollar on Feb. 28.
Gross domestic product, the sum of all goods and services produced in Canada, shrank at an annual pace of 0.3 percent from January to March, after 0.8 percent growth in the previous period.
The nation's central bank lowered the target lending rate by a half-percentage point to 3 percent on April 22 to shield the economy from the U.S.-led economic slowdown. The U.S. is Canada's biggest export market, consuming about 80 percent of its exports.
The bank will cut the rate by 25 basis points to 2.75 percent on June 10, according to the median forecast in a Bloomberg survey. A 25-basis-point reduction would cut the nation's interest-rate advantage with the U.S. to 0.75 percentage point.
The currency extended its loss as the price of crude oil declined after a U.S. government report showed that inventories of gasoline and distillate fuels, which include heating oil and diesel, rose more than forecast last week. Crude oil for July delivery fell 1.1 percent to $122.97 a barrel on the New York Mercantile Exchange. Commodities account for about half of Canada's exports. The oil sands in Alberta contain the largest crude deposits outside the Middle East.
The Canadian dollar fell 0.8 percent yesterday after Federal Reserve Chairman Ben S. Bernanke said the central bank is ``attentive'' to the implications of the U.S. currency's decline. Bernanke said interest rates are ``well positioned'' to promote growth and stable prices and he's aware of the effect of the dollar's decline on inflation and price expectations.