OTTAWA, Oct 20 — The Canadian dollar fell as Justin Trudeau’s Liberal Party won a majority government in today’s national election on a plan to stimulate the economy with deficit spending, putting an end to Conservative Prime Minister Stephen Harper’s decade-long rule.

The currency weakened versus 12 of 16 major peers in the Asian trading session as Canada’s three major broadcasters — CTV, CBC and Global News — projected a Liberal majority government.

The benchmark 10-year government bond, a traditional refuge for skittish investors, gained 12 cents to C$107.12 (RM349.57), pushing the security’s yield down one basis point to 1.46 per cent.

Trudeau campaigned on a plan that included running C$25 billion in deficits over three years to stimulate the economy with infrastructure spending, while increasing taxes on top earners and cutting them for the middle class.

“Investors are somewhat cautious about the change in government,” said Bipan Rai, director of foreign-exchange strategy at Canadian Imperial Bank of Commerce’s CIBC World Markets unit by phone from Toronto.

“It might be due to some uncertainty about how the fiscal picture is going to look.”

The loonie, as the Canadian dollar is known for the image of aquatic bird on the C$1 coin, fell 0.2 per cent to C$1.3044 per US dollar at 11:25pm in Toronto.

One loonie buys 77 US cents.

The collapse in the price of crude oil, one of Canada’s largest exports, tipped the country into recession in the first half of this year, forcing its central bank to twice cut interest rates to stimulate the economy.

The loonie fell to its lowest in more than a decade, while bond yields dropped to a record.

In recent weeks signs of stabilization in the price of oil and better economic data at home have lifted the loonie, helping it touch the strongest in three months on Oct. 15, and paring its losses for the year against the greenback to 11 per cent.

The Liberals dominated the country’s east coast and Elections Canada results showed them surging in Quebec and Ontario, well above what opinion polls had projected, due in large part to a collapse of the country’s other main opposition party, the New Democrats.

Every opinion poll in recent days had indicated the Liberals held a firm lead in the race, and were on course for at least a minority victory.

“Obviously governing is a little different than campaigning so the market will tend to be a little cautious on this front,” said David Tulk, chief Canada macro strategist at Toronto Dominion Bank.

“To see a little bit more Canadian dollar weakness going into tomorrow is to be expected.”

BOC decision

The Bank of Canada will review its benchmark interest rate, now at 0.5 per cent, on Wednesday, when it also releases its quarterly economic outlook.

While the median estimate among currency forecasters calls for the loonie to fall to C$1.34 per US dollar by year-end, the Liberal’s election win may end up supporting the currency if Trudeau’s planned stimulus delivers economic growth, said Karl Schamotta, director of foreign-exchange research and strategy at Cambridge Global Payments.

“If you do see some stimulus happening here in Canada via deficits you could see the Canadian dollar lift further on,” he said by phone from Toronto.

“For today, it’s somewhat negative for the Canadian fiscal balance but going forward it also has positive effects for the economy overall.” — Bloomberg