Investing.com - The Canadian dollar strengthened against the U.S. dollar on Wednesday after the Bank of Canada kept its benchmark interest rate on hold, but said second quarter growth is expected to be weaker than expected due to the Alberta wildfires.
USD/CAD was down 0.47% at 1.3063 from around 1.3109 ahead of the announcement.
The BoC kept its overnight cash rate unchanged at 0.50%, in line with market expectations.
Canada's central bank said the global economy was evolving largely as expected.
Domestic first quarter growth appears to be in line with its April forecast the bank said, although business investment remained disappointing.
"In Canada, the economy's structural adjustment to the oil price shock continues, but is proving to be uneven," the bank said.
The bank noted that damage from the Alberta wildfires and curtailment of production in the nearby oilsands region will cut about 1.25% off second quarter growth.
However, the BoC was confident that the economy would rebound in the third quarter, as oil production resumes and reconstruction begins.
"While the Canadian dollar has been fluctuating in response to shifting expectations of U.S. monetary policy and higher oil prices , it is now close to the level assumed in April," the bank added.
Regarding price stability, the BoC considered inflation to be roughly in line with its expectations.
"Meanwhile, the risks to the bank's inflation projection remain roughly balanced," it said.
The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, eased to 95.48 from overnight highs of 95.66, the strongest level since March 29.
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