Tue, Apr 21 2009, 13:45 GMT
by Ashraf Laidi
Canada’s decision to target monetary reserves of C$ billion is textbook “quantitative easing” (not only credit easing), which is the way the Bank of Japan announced policy easing in 2002-04. Canadian dollar damaged across the board as the Bank of Canada is the latest central bank to dive into quantitative easing by unexpectedly cutting rates by 25-bps to a historical low of 0.25%, revising down its 2009 GDP growth forecast to -3% from previous -1.2% and revises 2010 GDOP growth forecast to +2.5% in 2010 from earlier +3.8%. Market was expecting rates unchanged, followed by an explanation of its intentions on Thursdays’ policy update. But decision to balance a target balance is weighing on the loonie across the board. Considering the escalating positive correlation between CAD and equities (+0.74 since April and +0.73 since Jan) any further deterioration in risk appetite is to magnify losses in CAD. USDCAD seen extending gains towards 1.2650, CADJPY eyes 75.70 and EURCAD at 1.6360.
Published on Tue, Apr 21 2009, 13:46 GMT
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