The Canadian dollar plunged Wednesday to a post-recession low after the Bank of Canada cut its key interest rate and lowered its economic forecast.
The loonie dropped more than a full U.S. cent to as low as 77.17 cents U.S., a level not seen since March 2009, when stocks were in bear market territory.
Read: BoC cuts rate to 0.5%
The Canadian dollar ended the day at 77.40 cents U.S., down 1.09 cents from Tuesday’s close.
“A weaker Canadian dollar will lend a hand to Canada’s export sector, which has faltered thus far in 2015, and is increasingly being counted upon to drive growth going forward,” says a report from TD Economics.
“Looking ahead, the weak economic performance in 2015 has pushed back our expectations for any future hiking cycle,” the report adds. “We now expect the Bank of Canada to stay its hand on this front until mid-2017.”
Read: Yellen says rate hike likely this year
CIBC predicts the loonie could continue to its decline “not due to a surprise third rate cut in Canada, but driven off an earlier-than-expected Fed hike in September.”
The S&P/TSX composite index, which was flat before the Bank of Canada announced its decision at 10:00 a.m, jumped as much as 0.7% in the morning.
At the end of the trading day, the index pared some of its gains but still closed at 14,662.28, a gain of 62.88 points or 0.43%.