Canada Intervenes to Avoid Currency Weakening

Article excerpt

DOWNWARD pressure on the Canadian dollar in world currency markets forced Canada's central bank to intervene more forcefully last week to support its currency.

The Canadian dollar's value had fallen from 87 United States cents at the beginning of the year to 80.62 cents last week, dropping 2 cents in the last week alone.

Eager to avoid the sort of nose dive facing some European currencies, the Bank of Canada raised the interest rate it charges on loans to commercial banks to 5.69 percent on Thursday, up from 5.34 percent the week before.

Analysts expect the move to stabilize the currency's value. The Bank of Canada has intervened in the foreign-exchange market several times in the past two weeks as the dollar's slide accelerated along with turmoil in European markets. Economists said the weakness was caused mostly by investors concerned about turmoil on world markets. Investors were also demanding a higher return for placing investments in bonds and equities denominated in Canadian dollars for reasons that include:

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