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Forex - USD/CAD tumbles to 7-day low after BoC points to rate hike

Published 05/31/2011, 09:30 AM
Updated 05/31/2011, 09:30 AM

Investing.com – The U.S. dollar tumbled to a seven-day low against its Canadian counterpart on Tuesday, after the Bank of Canada indicated that interest rates will “eventually” rise.

USD/CAD hit 0.9663 during early U.S. trade, the pair’s lowest since May 20; the pair subsequently consolidated at 0.9668, tumbling 1.03%.

The pair was likely to find support at 0.9603, the low of May 13 and resistance at 0.9786, Monday’s high.

Earlier in the day, the Bank of Canada held the overnight rate at 1.0%, in a widely expected decision.

In its rate statement, the central bank said the persistent strength of the Canadian dollar could create headwinds for the Canadian economy but added that monetary stimulus will be eventually withdrawn.

Meanwhile, Statistics Canada said its raw materials price index surged 6.8% last month, as a result of a strong upward movement in crude oil prices. Analysts had expected the RMPI to rise by 3.7% in April.

The industrial product price index rose by 0.5% in April, after climbing by 1.0% the previous month, disappointing expectations for a 0.7% increase.

The loonie also found support as crude oil prices rallied on the back of a broadly weaker U.S. dollar. Raw materials, including oil account for about half of Canada’s export revenue.

The loonie was also up against the euro, with EUR/CAD slipping 0.12% to hit 1.3938.

Also Tuesday, private sector data showed that U.S. house prices fell more-than-expected in March, declining for the ninth consecutive month.

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