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    Asian Session – Drop in oil prices puts pressure on loonie ahead of BoC

    As there were no major releases or events during today’s Asian trading, currencies took their cue mainly from developments in other markets such as oil and stocks.

    The yen for example appeared to benefit from profit-taking in equities after Wall Street lost about 1% during Tuesday’s trading and Chinese and Japanese equities were also under some pressure today (also losing about 1%).  Some concern about the Chinese economy lingered after the previous day’s dismal trade numbers out of the world’s second largest economy.

    Oil also backed off its recent highs, with the US crude falling below $37 a barrel and the UK-traded Brent crude dropping under $40.  This caused the Canadian dollar to retreat from its 3 ½ month high against the greenback of 1.3260 to trade above 1.34.  The loonie was looking forward to today’s Bank of Canada meeting, with the announcement expected at 1500 GMT.  No change was expected in the 0.50% target overnight rate; the Bank’s policy rate.

    The aussie was also under some pressure but comfortably held the 74 cent level versus the US dollar.  Economic data out of Australia was on the disappointing side as home loans fell more than expected in January and Westpac Consumer Confidence fell during March.

    The euro gave up some ground versus the dollar, dropping below the 1.10 level which has proved to act like a magnet for the pair during the past 2-3 trading days.  Market participants expected the ECB to act tomorrow and provide more stimulus for a Eurozone economy that has again fallen into deflation.  However traders were also wary of the precedent back in December when expectations of even more aggressive stimulus in the end did not materialize.

    Looking ahead, the day’s key data point will be released out of the UK as January industrial production will come out.  No other news is expected until the Bank of Canada releases its monetary policy decision and a little later crude oil inventories will also be released.  Towards the end of the US session, the Reserve Bank of New Zealand will announce its decision – most probably leaving rates unchanged but with some analysts predicting there could be a surprise rate cut.

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