Canada dollar falls to 6-month low as CPI drop exceeds forecast

Yen Concern

Canadian finance minister Jim Flaherty said he’s concerned about the Japanese government’s policy of weakening the yen to stimulate growth, and he spoke to his Japanese counterpart about it, during an interview with Bloomberg Television’s Erik Schatzker at the World Economic Forum in Davos, Switzerland.

“We’re worried about deflation in their economy and ours and others,” he said. “We have a strong currency because we’re a reliable, fiscally responsible country. It’s a good thing, but it’s also a bad thing because our currency bounces up. We’re watching it.”

Canada’s annual inflation rate held at a three-year low of 0.8 percent in December, keeping it below the bottom of the central bank’s target band, as food and shelter costs moderated. The core CPI, which excludes eight volatile products, slowed to 1.1 percent from a year earlier from 1.2 percent, the slowest since February 2011.

“Dollar-Canada is searching for a new range and that new range will likely be governed by what the market expects will be a weak CPI, so we could be in store for a move to and through the next level of resistance,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada by phone from Toronto, before the report. “Canada has been held up in the past on the inference the Bank of Canada would be the first out of the G-7 block to raise rates. Governor Mark Carney put an end to that speculation.”

Bloomberg News

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