* Canadian dollar slides as dovish BOC calls for lower
* Pound jumps as falling unemployment brings rate hike
* Eyes on China's manufacturing sector report
By Ian Chua
SYDNEY, Jan 23 The Canadian dollar wallowed at
four-year lows early on Thursday after the Bank of Canada all
but begged the market to sell the currency, while sterling took
off as investors priced in an earlier start to rate hikes in the
The loonie traded at C$1.1086 per U.S. dollar after
falling as far as C$1.1092 and bringing its decline this year to
4 percent. It fell nearly 7 percent for the whole of 2013.
The pound gained even more, jumping 1.8 percent to its
highest since mid-2009 at C$1.8385. Sterling was on a
tear after a sharp drop in UK unemployment added to the case for
an early tightening.
In contrast the Bank of Canada took a leaf out of the
Reserve Bank of Australia's (RBA) play book and tried to talk
down the loonie, saying a still strong currency posed an
obstacle to exports. It also said it had become more concerned
about weak inflation.
"It seems as though Governor Stephen Poloz may revert back
to the BOC's easing cycle as the persistent slack in the real
economy continues to drag on price growth," said David Song,
analyst at DailyFX.
"At the same time, the BOC made it increasingly clear that a
further depreciation in the Canadian dollar should further
assist with the rebalancing of the real economy."
That echoes the RBA which spent much of last year
complaining about the strength of the Australian dollar. Its
efforts played a part in a 14-percent slide in the currency.
The Aussie, however, appeared to have found good support
below 88 U.S. cents and could build on that base after data on
Wednesday showed surprisingly robust inflation at home.
Investors saw the outcome as greatly reducing the scope for
another interest rate cut, driving the Aussie back up towards 89
cents. It was last at $0.8849.
Whether the Aussie can break above 89 cents depends on a
closely watched report on China's manufacturing sector due at
Any signs of a further slowdown in Australia's single
biggest export market could see the Aussie's rebound come to an
The other major currencies were trapped in familiar ranges
overnight amid a lack of fresh impetus in the lead up to the
Fed's Jan. 28-29 policy meeting.
There is talk the U.S. central bank will further reduce its
bond-buying programme as the world's biggest economy continued
Such an outcome should provide a floor for the U.S. dollar,
which firmed slightly against a basket of major currencies
to be near a two-month peak set on Tuesday.
The euro eased to $1.3547, not far from a two-month
trough of $1.3508 plumbed on Monday. Against the yen, the common
currency was little changed at 141.63, while the
dollar edged up to 104.55.
On Wednesday, the Bank of Japan dismissed the need for
additional monetary easing, dampening expectations for more
stimulus to offset the impact of a sales tax rise in April.