Investing.com - The Canadian dollar fell to six-year lows on Wednesday after the Bank of Canada cut its overnight rate and lowered its growth forecast for this year, largely due to a weaker outlook for business investment in the energy sector.
USD/CAD jumped 1.56% to 1.2926, the most since March 2009 from around 1.2787 ahead of the announcement.
The BoC lowered its target for the overnight rate to 0.5% from 0.75%.
The bank said global growth faltered in early 2015, principally in the U.S. and China. Slowing growth in China had pulled down commodity export prices, which are important to Canada’s economy.
Global economic growth is expected to strengthen in the second half of this year the bank said, but it revised down its estimate for Canadian economic growth from its April rate statement.
The bank said it now projected gross domestic product to have contracted modestly in the first half of the year, adding to downward pressure on inflation.
Canada’s economy is now expected to expand by just over 1% in 2015, down from 1.9% in April.
The loonie, as the Canadian dollar is also known, had weakened against the greenback earlier after Federal Reserve Chair Janet Yellen reiterated that the bank is on track to raise interest rates later this year if the economy continues to evolve as expected.
Separately, reports showed that U.S. producer prices rose more than expected in June and factory activity in New York state rebounded this month.
The Department of Labor said the producer price index rose 0.4% in June, ahead of forecasts for a 0.2% increase. It was the second consecutive monthly increase.
Meanwhile, the New York Fed said its Empire State manufacturing index rose to 3.86 in July from minus 1.98 in June, which was its lowest level since January 2013.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last up 0.63% to a more than one-week high of 97.42.