The Canadian dollar closed at its lowest mark in more than three years on Wednesday as the Bank of Canada's rate announcement left markets with the impression that interest rate hikes are still a long way off.
In the U.S., positive economic news lifted the American currency and bond yields.
The loonie ended down 0.26 of a cent at 93.65 cents (U.S.) – its lowest level since May, 2010 – as the bank left its key rate unchanged at 1 per cent, where it has been since September, 2010, as the global economy continues to dig itself out from the 2008 financial crisis and recession. The currency had dipped as low as 93.4 cents (U.S.).
The Bank of Canada made no changes to its neutral stance on whether its next move will be to raise or cut its rates.
"The bank's message had a decidedly dovish tilt," observed CIBC World Markets chief economist Avery Shenfeld.
The loonie has been buffeted by a variety of factors but losses really picked up after the bank's October rate announcement, when the bank changed to a more dovish stance on interest rates.
The loonie started the year at 100.51 cents.
Other headwinds include weakening oil prices and a U.S. dollar that has risen alongside Fed speculation about tapering its $85-billion of monthly bond purchases.
Worries that the Fed could move sooner rather than later on cutting back on asset prices were elevated Wednesday after payroll firm ADP reported that the American private sector created 215,000 jobs during November. Economists have been forecasting that the government report would show that the economy cranked out a total of 183,000 jobs during the month.
While the data are a sign of an improving economy, analysts believe a report showing continuing, steady employment gains could persuade the Federal Reserve that it's time to start cutting back.
The report came out two days before the release of the U.S. non-farm payrolls report for November.
Canadian jobs data also come out on Friday and economists expect the economy to have created about 7,500 jobs during the month.
Other data showed that sales of new homes grew 25.4 per cent to a seasonally adjusted annual rate of 444,000 in October, the largest monthly percentage increase since May, 1980.
Elsewhere on the economic front, Statistics Canada reported that the country's trade balance with the rest of the world moved from a deficit to a surplus.
Statistics Canada reported that the trade balance showed a $75-million (Canadian) surplus, an improvement from the $303-million deficit registered in the previous month.
Imports declined 1.2 per cent while exports decreased 0.3 per cent in October.
And in the U.S., the trade gap narrowed to $40.6-billion (U.S.) in October as oil sales boosted exports to a record level.
U.S. bond yields advanced in the wake of the positive economic data with the benchmark U.S. 10-year Treasury climbing to 2.84 per cent late in the afternoon from 2.78 per cent, its highest level in more than two months.
Oil prices were higher following the jobs data and another report showing a drop in U.S. crude inventories. The January crude contract on the New York Mercantile Exchange gained $1.16 to $97.20 a barrel as the Energy Information Administration said crude supplies fell 5.6 million barrels last week, much bigger than the decline of 1.25 million barrels that analysts had looked for.
Metal prices also improved with March copper ahead 8 cents to $3.25 a pound. And February bullion rose $26.40 to $1,247.20 an ounce.