Loonie erases losses after Bank of Canada holds key rate at 0.75%

<p>The Canadian dollar erased losses after the Bank of Canada held its policy rate unchanged, giving traders comfort the economy is weathering the plunge in the price of crude.</p>
<p>Policy makers voted to maintain an overnight rate of 0.75 percent as sufficient stimulus to help steer the economy through the oil-price slump. The decision was forecast by 16 of 21 economists in a Bloomberg survey conducted Feb. 27. It was one of the most closely watched monetary policy announcements since 2009 when the financial crisis triggered near-zero rates by central banks around the world.</p>
<p>The loonie strengthened 0.2 percent to 80.16 cents US at 10:01 a.m. in Toronto. It weakened as much as 0.4 percent earlier.</p>
<p>Bank of Canada Governor Stephen Poloz called the Jan. 1 rate reduction insurance to cushion against deflationary pressures and head off job losses. The quarter-point move ended a four-year pause in interest rates and caught the markets unprepared.</p>
<p>"It shows the insurance policy is allowing the bank to hold for the moment," Jack Spitz, managing director of foreign exchange at National Bank of Canada, said by phone from Toronto before the announcement. "The bank reserves the right to cut if economics or the price of crude dictates it."</p>
<p>Poloz said last week the rate cut buys the central bank time to "see how the economy actually responds."</p>