Wednesday, December 8

Canadian dollar consolidates October rally ahead of Fed decision


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TORONTO — The Canadian dollar weakened to

its lowest level in nearly a week against its US counterpart

on Tuesday, as oil prices fell and investors grew cautious ahead

of an expected reduction of economic stimulus by the Federal

Reserve.

The loonie was trading 0.3% lower at 1.2403 to the

greenback, or 80.63 US cents, having touched its weakest level

since last Wednesday at 1.2424. In October, the currency was up

2.3%, its biggest gain since last November.

We are seeing some “consolidation of October’s gains,” said

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Michael Goshko, corporate risk manager at Western Union Business

Solutions.

“The Canadian dollar doesn’t trade in a vacuum so when you

have a US dollar that’s a little stronger overall, the

Canadian dollar will get swept up with other currencies,” Goshko

added.

The US dollar rallied against a basket of major

currencies as the Fed kicked off its two-day policy meeting

where it was expected to announce it will begin tapering its

massive asset purchases put in place at the start of the

COVID-19 pandemic.

Gains for the greenback came as the Reserve Bank of

Australia sounded a more dovish tone than investors had

anticipated, sending the Aussie to its biggest one-day loss

since Sept. 29.

Last week, the Bank of Canada said it could hike rates as

soon as April, three months earlier than previously thought.

The price of oil, one of Canada’s major exports, settled

0.2% lower at $83.91 a barrel ahead of weekly US supply

reports expected to show a rise in crude inventories.

Canadian government bond yields eased across the curve,

tracking the move in US Treasuries.

The Canadian 10-year yield fell 1.6 basis points

to 1.733%, after touching on Monday its highest intraday level

since May 2019 at 1.766%.

(Reporting by Fergal Smith; editing by Jonathan Oatis and

Sandra Maler)



financialpost.com