TORONTO - The Canadian dollar closed down Wednesday as the Bank of Canada said it was keeping its key rate unchanged at one per cent and lowered its estimate for economic growth this year.
The loonie fell 0.58 of a cent to 97.41 cents US as the bank cut its 2013 economic growth forecast to 1.5 per cent from an earlier estimate of two per cent.
The central bank's announcement suggests it will need to keep interest rates in Canada at historically low levels well into 2014, if not beyond.
The Bank of Canada's latest assessment was largely in line with the latest assessment from the International Monetary Fund.
The IMF said Tuesday that Canada's economy will likely slow to about 1.5 per cent this year from 1.8 last year, before picking up to 2.4 per cent in 2014. But the Bank of Canada was more optimistic about next year, raising its 2014 growth forecast to 2.8 per cent growth from 2.7 per cent.
Oil and copper prices retreated a day after the IMF also lowered it global economic growth projections. The IMF cut its forecast for global growth to 3.3 per cent this year, down from its forecast in January of 3.5 per cent. The IMF predicts that government spending cuts will slow U.S. growth and keep the euro currency alliance in recession.
The IMF is keeping its prediction of four per cent global growth in 2014.
Further prospects for a sluggish recovery sent the May crude contract on the New York Mercantile Exchange down $2.04 to US$86.68 a barrel.
Copper, viewed as an economic bellwether, slid 12 cents to US$3.19 a pound.
Both oil and copper sustained steep declines Monday in the wake of Chinese growth data that failed to meet expectations. The world's second-largest economy grew at a 7.7 per cent rate in the most recent quarter, crushing hopes for growth of around eight per cent.
That prompted some private sector economists to cut their full-year growth forecasts for China, although they remained at a still robust level of just under eight per cent. The World Bank reduced its growth outlook this week from 8.4 per cent to 8.3 per cent.
On Wednesday, China's government promised steps to boost domestic consumption as a driver of the economy.
The June contract on the Nymex lost $4.70 to US$1,382.70 an ounce after tumbling US$140 on Monday.