01/24/2013 10:26 EST | Updated 03/26/2013 05:12 EDT

Loonie below par for 1st time since November

A day after the Bank of Canada delivered a bleaker outlook for Canada's economy, the loonie is trading below par with the U.S. dollar for the first time in two months.

The Canadian dollar was changing hands at 99.86 cents US, down a quarter of a cent.

After the Bank of Canada held rates steady on Wednesday and hinted it's in no hurry to hike them, the loonie almost instantly plunged below par with the U.S. greenback before managing a small rebound through the rest of the day.

But on Thursday, Canada's currency ran out of steam, heading below the $1 US level for the first time since mid-November last year.

The Bank of Canada's action were the main reason for the pessimism.

Scotiabank currency strategist Camilla Sutton says the foreign exchange market now thinks there's only about a 10 per cent chance of a rate hike in the next 12 months, something that would send the loonie higher. Before the bank released its policy decision, the market figured there was about a 25 per cent chance of that happening.

"We maintain that [the loonie] will rally into year end …closing the year at 0.96," she said in a note Thursday morning.