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Bank of Canada Lifts Rates

By Richard Lee
24 May 2006 19:49 GMT

Commentary indicated that the current interest rate would keep the economy on track and not bumping up against capacity.  This small jump was somewhat short-lived in the morning hours, however, the currency pair weakened for the rest of the day with the specter of higher near term rates.  Oil took a hit after yesterday’s gains with the release of continuing growth in US stockpiles of gasoline.  This sent the USD/CAD pair down to 1.1219 right before noon.  The pair has continued to fluctuate around 1.1200 through the early afternoon.

 

TheToronto stock exchange began the morning with heavy losses as commodity prices dropped, losing more than 100 points before noon.  A 1.9 percent drop in the energies group and a 1.6 percent drop in the materials group that includes gold shares, which saw a loss of 2.5 percent, led the fall.  AnorMed, a Toronto based company that recently announced it received approval from the US FDA to begin Phase 3 trials on an stem cell replacement drug, saw a drop of almost 5.5 percent with the announcement that its President and CEO Mike Abrams has resigned.  Shareholders, led by New York based Baker Brothers Advisors, moved in April to replace the board.  Bank of Montreal released a positive second quarter earnings statement but this failed to give significant confidence to investors as commodity prices weighed on the markets.  The company saw a slight drop in its stock price despite 7.1 percent earnings growth.

 

Canadian bonds showed little reaction to the rate announcement but did see a drop in price after the release of the US housing data.  The benchmark two-year bond saw an increase in yield of 5 basis points to 4.11 percent.

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24 May 2006 19:49 GMT