The currency fell against the majority of its most-traded peers before a central-bank meeting tomorrow, when policy makers are projected to hold the benchmark interest rate at 1 percent.

A report last week showed third-quarter economic growth was the fastest in two years even as exports fell, frustrating the Bank of Canada's expectations for trade to drive growth as over-indebted consumers pare back.

"There's still a bias, there's a possibility somewhere down the road that the Bank of Canada possibly has another interest-rate cut," said David Bradley, director of foreign exchange trading at Scotia Capital Inc., a unit of Bank of Nova Scotia, by phone from Toronto. "With the announcement tomorrow, that's just kind of weighing on the Canadian dollar."

 

Eoin Treacy's view

US domestic oil and gas supply growth continues to displace Canadian supply and makes developing additional markets for Canada¡¯s energy resources a national priority. Since it will still be a few years before export facilities on the west coast come online, the country¡¯s export growth ambitions will need to rely on other sectors. Depending on how much exports are impacted, the possibility remains open that the Bank of Canada may decide to opt for additional easing in an effort to rebalance the economy towards domestic demand not least since the Canadian Dollar has been trading at historically high level for the last few years. 

The C$1.05 area has represented an area of resistance on a number of occasions over the last two years but the US Dollar rallied through it this week. A sustained move below that level would now be required to question potential for a return to medium-term US Dollar outperformance. The Canadian Dollar Trade Weighted Index also has a medium-term rounding characteristic consistent with medium-term top formation development.