Forex – Canadian Dollar Falls after Dovish BoC Rate Hike

© Reuters. Canadian dollar falls after dovish BoC rate hike – The Canadian dollar fell against its U.S. counterpart on Wednesday after the Bank of Canada but cautioned that uncertainty over the North American Free Trade Agreement is clouding the economic outlook.

was up 0.42% to 1.2486 by 10:09 AM ET (15:10 GMT) from around 1.2412 earlier.

The BoC hiked its overnight cash rate to 1.25% from 1.0%, in a widely anticipated decision.

The bank said recent economic data has been strong, inflation is close to target, and the economy is operating roughly at capacity, but warned that uncertainty over the future of NAFTA is clouding the economic outlook.

The bank gave an upbeat outlook of the global economy, forecasting growth of 3.5% on average and indicated that there were particularly signs of increasing momentum in the U.S. economy, which it expects to be boosted by recent tax reforms.

“While the economic outlook is expected to warrant higher interest rates over time, some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target,” the bank’s statement said.

The bank reiterated that it would remain cautious in considering future policy adjustments and would be guided by incoming economic data.

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