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Canadian Dollar Falls Sharply As BoC Retains Rate; Removes Rate Hike Bias

The Canadian dollar drifted lower against its key counterparts in the New York session on Wednesday, after the Bank of Canada kept its benchmark rate unchanged and eliminated its wording suggesting the hint for rate hikes in future from the statement.

The BoC maintained its benchmark rate at 1.75 percent, in line with expectations.

The economic growth during the first half of 2019 is now estimated to be slower than anticipated in January, the bank said.

Inflation is forecast to dip in the third quarter, due to the dynamics of gasoline prices, before returning to about 2 percent by year end.

"Given all these developments, the Governing Council judges that an accommodative policy interest rate continues to be warranted," the bank noted.

This was in contrast with the March statement which suggested "about the timing of future rate increases."

The currency was trading higher against its major counterparts in the European session.

The loonie fell to 82.68 versus the yen, its lowest since March 29. This follows a high of 83.34 touched at 5:00 pm ET. The loonie is seen finding support around the 80.5 level.

The loonie that closed yesterday's trading at 1.3421 against the greenback depreciated to a 3-1/2-month low of 1.3521. The next possible support for the loonie is seen around the 1.36 level.

The loonie declined to an 8-day low of 1.5129 against the euro, compared to 1.5070 hit late New York Tuesday. If the loonie drops further, 1.525 is possibly seen as its next support level.

Survey data from the Ifo Institute showed that Germany's business confidence unexpectedly weakened in April to its lowest level in three years.

The Ifo business climate indicator dropped to 99.2 from an upwardly revised 99.7 in March. Economists had expected the index to climb to 99.9 from March's original 99.6.

The loonie pulled back to 0.9496 against the aussie, from a 3-week high of 0.9444 hit at 9:45 am ET. Next key support for the loonie is likely seen around the 0.96 level.

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