Loonie slips below 91 cents US
Bank of Canada to make interest rate announcement Wednesday
The Canadian dollar slipped below 91 cents US on Tuesday to 90.91 ahead of an interest rate announcement set for Wednesday from the Bank of Canada.
It had recovered slightly by mid-morning and at the end of the day stood at 91.16 US.
The S&P/TSX composite index dropped 38 points on the day to 13,951, mainly on weak gold stocks.
The Bank of Canada is not expected to change its key overnight lending rate on Wednesday, though there is pressure from some to lower rates to keep the dollar higher.
Canada's central bank hasn't moved its benchmark lending rate since September 2010.
Bank of Canada governor Stephen Poloz has said he is worried about the slow recovery of Canadian exports and he may prefer to leave the interest rate low to make it easier for Canadian manufacturers and producers to sell their goods.
RBC allowed its fixed-rate mortgage interest rates to fall by 10 basis points on Monday, reflecting lower yields on Canadian bonds.
The loonie is under pressure because traders are moving back to the U.S. dollar amid signs of a recovering U.S. economy.
The Canadian dollar is trading at its lowest levels since 2009, after falling from par in February 2013. The greenback has gained strength since the U.S. Federal Reserve started to cut back its monthly bond buyback program to $75 billion in January.
The loonie has lost 2.5 cents against the US dollar since the beginning of January.
"I'm trying to think of factors where the loonie will move back up and I can't think of them," said Ian Nakamoto, director of research for 3MACS.
"The U.S. economy is growing at a stronger pace than Canada and they are doing away with stimulus and we're sort of neutral. In many ways, even the BoC, and [Jim] Flaherty, they don't mind a weaker Canadian dollar because the economy has got to get going here. We have to see how this all plays out. These things can go in wild swings."
With files from the Canadian Press