Central Bank Decisions Reinforces the Rupees and Loonies

Two different central banks decided to hold their official interest rates still recently. The RBI and BoC’s decisions steadied and refueled India’s rupees and Canadian dollars.

First, the Bank of Canada announced on Wednesday that it leaves its interest rate unmoved. That wasn’t much of a surprise, though.

What caught the market off guard was the dovish remarks the BoC gave after announcing the decision. Traders were expecting the bank to reiterate the rather downbeat rhetoric.

However, the bank gave a somehow dovish assessment of the local and world economy and their outlooks. This immediately sent the loonie soaring in sessions, even against India’s rupees.

According to the bank of Canada, it is noticing developing evidence that the country’s economy is starting to stabilize.

The bank also acknowledges the robust Canadian economy, citing the surprise of upbeat data from recent reports. Recently, there was a surprise boost in the country’s business investment, which then followed by an upbeat housing construction report.

The Other Bank

So, aside from the Bank of Canada, the Reserve Bank of India also recently decided to leave its interest rate unchanged. Finally, after five consecutive rate cuts, the RBI decides to stop easing this December.

The move shocked the market and steadied India’s rupees in yesterday’s trading sessions.

In its last monetary policy meeting in November, the bank left to floor open for speculations, whether it will ease this December. This raised expectations, of course, after five rate cuts, traders were widely waiting for the sixth.

The benchmark interest rate still stands at 5.15%. The Reserve Bank of India slashed its interest rate last November by 25 basis points. So, all in all, the bank slashed 135 basis points since February 2019.

According to the reserve bank, it will maintain its accommodative stance until it sees it as necessary. However, what prevents the Indian rupees from gaining after the RBI decided to hold, is the bank’s growth forecast.

Yesterday, the bank also decided to reduce its medium-term target for the country’s inflation to just 4%.