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Loonie Retreats with Slowing Consumer Inflation

September 20, 2013 at 20:50 by Vladimir Vyun

Canadian coins on Canadian dollar billsThe Canadian dollar dropped today as growth of consumer prices slowed, giving the central bank no incentive to tighten its monetary policy. The currency was also falling on speculations that the previous rally was excessive.

The Canadian Consumer Price Index rose 1.1 percent in August, year-on-year, after increasing 1.3 in the previous month. Monthly inflation remained at 0.1 percent. The data suggested that the Bank of Canada is in no hurry to raise interest rates.

The loonie (as the Canadian currency is nicknamed) has rallied previously on absence of stimulus reduction from the Federal Reserve. Now, the Canadian dollar retreats together with some other currencies as traders speculated that the gains were unsustainable.

USD/CAD rose from 1.0263 to close at 1.0297 today. EUR/CAD went up from 1.3885 to 1.3925, while the daily maximum was at 1.3946. CAD/JPY dropped from the opening of 96.85 to the settlement price of 96.42.

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