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Canadian dollar falls on chance of interest rate cut
By Haris Anwar
Bloomberg News Service
Monday, November 19, 2007
TORONTO -- Canada's dollar fell to an almost six-week low after Bank of Canada Governor David Dodge said an interest rate cut is possible because of "risks" to economic growth.
Dodge said growing threats to the global economy and volatility in financial markets may affect the country's benchmark lending rates. Interest-rate futures suggest traders have increased bets the central bank will cut the borrowing cost from 4.5 percent early next year.
"The central bank has started to take note of the downside risk coming from the trade side," said David Watt, a senior currency strategist at RBC Capital Markets in Toronto. "The days of easy gains in the Canadian dollar are gone."
Canada's dollar weakened 1.1 percent to 98.43 cents per U.S. dollar in Toronto at 4:14 p.m. One Canadian dollar buys $1.0159. The Canadian dollar reached 98.88 Canadian cents per U.S. dollar on Nov. 16, its weakest since Oct. 9.
Canada's trade surplus narrowed more than forecast in September to a nine-year low, as the country's currency soared to parity with the U.S. dollar and hurt exports of machinery and industrial goods, a government report said on Nov. 9.
"It's quite clear the downside risks to world growth have increased" since policy makers from the Group of Seven nations met in Washington a month ago, Dodge told reporters during a conference call from South Africa. "That clearly poses a risk, which we're going to have to take into account in setting our own policy."
Dodge is in South Africa for meetings with finance ministers and central bankers from the Group of 20 nations.
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