Loonie tumbles after Canadian interest rate surprise

TORONTO -- The Canadian dollar fell almost a full U.S. cent Wednesday after the Bank of Canada surprised markets with a quarter-point cut to its key short-term rate while trimming economic growth expectations because of the collapse in oil prices.

The bank had been universally expected to leave its rate unchanged at one per cent, where it had been since September, 2010. However, the bank dropped the rate to 0.75 per cent and said that "the oil price shock increases both downside risks to the inflation profile and financial stability risks"

The loonie tumbled 0.94 of a cent to 81.66 cents US -- its lowest level since late April 2009. It was a second day of heavy losses -- a combination of falling oil prices, a weak manufacturing report and an economic downgrade from the International Monetary Fund pushed the loonie down more than one U.S. cent Tuesday.