Loonie Plunges to Lowest Since March as Retail Sales Disappoint

(Bloomberg) -- The Canadian dollar tumbled to the lowest since March after retail sales unexpectedly dropped in August while inflation accelerated last month at a slower-than-forecast pace.

The loonie is on pace for the biggest weekly decline since May as the data add to concern about Canada’s economy. The slump began Wednesday when Bank of Canada Governor Stephen Poloz said that officials “actively” discussed the possibility of adding more stimulus into the economy.’

“So now we know why the BOC considered easing,” said Greg Anderson, global head of foreign-exchange strategy in New York at Bank of Montreal. “Economic growth in the third quarter doesn’t look as good as expected, inflation is below target and it’s unclear where an acceleration would come from.”

The loonie fell 0.8 percent to C$1.3332 per U.S. dollar as of 10:06 a.m. in Toronto, reaching the weakest level since March 16. The Canadian dollar is down 1.5 percent this week, the worst performance among Group-of-10 currencies.

The yield on the country’s two-year federal government bond fell for the fifth day to 0.51 percent, heading for the steepest weekly decline since June.

Retail sales fell 0.1 percent in August, compared with forecasts for a 0.3 percent gain. Consumer inflation accelerated for the first time in five months in September to 1.3 percent, however the jump was below the 1.4 percent rate economists were forecasting.

The probability of a BOC interest-rate cut this year rose to 16 percent from 7 percent Thursday, overnight index swaps data compiled by Bloomberg shows.

To contact the reporter on this story: Maciej Onoszko in Toronto at monoszko@bloomberg.net. To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net, Paul Cox