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Loonie pulls back again as Chinese factory report gives little optimism

Canadian dollar

Jonathan Haywar/The Canadian Pres

The Canadian dollar was trading at its lowest level in more than four years early Thursday after a weak report on Chinese manufacturing and the Bank of Canada's latest interest decision.

The loonie traded as low as 89.35 in the morning Thursday, a level that it hasn't reached since July 17, 2009 when it was at 89.32.

At midday, the Canadian dollar was worth 89.85 cents US, down 0.34 from Wednesday's close.

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In its latest economic reading on Wednesday, Canada's central bank said it expects the Canadian dollar to remain strong and "continue to pose competitiveness challenges for Canada's non-commodity exports."

It stopped short of calling the currency overvalued, as it left its key interest rate unchanged at one per cent. The central bank also noted that inflation has been lower than expected and won't return to its ideal target of two per cent until 2016.

"If it was the BoC's intention to ease some of the pressure on the Canadian dollar, it was certainly not the tonic needed," wrote Mark Chandler, head of Canadian FIC Strategy at RBC Dominion Securities.

Meanwhile, the results of HSBC's preliminary survey of Chinese factory purchasing managers in January fell below the level indicating expansion for the first time since July.

The report came days after data showed China's economy slowed in the final quarter of 2013.

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