Canada's dollar sagged against its US counterpart on Friday as weaker-than-expected inflation data gave the Bank of Canada more breathing room to keep interest rates low or cut them if Europe's debt problems worsen. Slower growth in gasoline prices and lower vehicle costs helped push down the consumer price index by 0.6 percent in December, resulting in annual inflation slowing to 2.3 percent from 2.9 percent in November.
The annual core rate, a more accurate picture of underlying price pressures, fell to 1.9 percent from 2.1 percent. Analysts surveyed by Reuters had forecast, on average, annual inflation of 2.8 percent in December and a core rate of 2.1 percent. Higher interest rates tend to help currencies strengthen by attracting international capital flows, and the prospect of monetary easing typically weakens them.
The Canadian dollar finished the session at C$1.0132 to the US dollar, or 98.70 US cents, after hitting a session low of C$1.0165 to the US dollar, or 98.38 US cents immediately after the inflation headlines landed. It closed at C$1.0114 on Thursday. The currency firmed about 1 percent for the week.
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