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CANADA’S FX DEBT – Canadian dollar drops most in 7 weeks as Fed meeting approaches

By on June 11, 2021 0

(Add quotes and strategist details; update prices) * Canadian dollar weakens 0.6% against greenback * Loonie hits 4-week low at 1.2177 * Oil hits multi-year high at $ 71.24 per barrel * Canadian 10-year yield peaks Three-month low By Fergal Smith TORONTO, June 11 (Reuters) – The Canadian dollar has weakened to a four-week low by compared to its significantly stronger US counterpart on Friday, as investors weighed the risk of the Federal Reserve taking action that could tighten policy to an interest rate announcement next week. The loonie was trading down 0.6% to 1.2169 against the greenback, or 82.18 cents US, its largest decline since April 20. It hit its lowest intraday level since May 14 at 1.2177. For the week, it was down 0.8%. “This is a huge dollar story, where we saw a sharp rebound in the (US) dollar index and the dollar-CAD came into place,” said Greg Anderson, global head of FX strategy at BMO Capital Markets. “The market was ripe for this correction, and it could drag on for another day or two.” The US dollar rallied as investors bet interest rates would stay lower longer in Europe. “We have a nervous market ahead of the FOMC next week. This is a critical event, “Anderson said, referring to the Fed’s Federal Open Market Committee. Avenues the Fed could use to tighten its policy include raising the interest rate it pays on reserves. surplus., projecting an earlier date for its first rate hike and recognizing that now is the time to talk about reducing quantitative easing. With soaring commodity prices, the Canadian dollar has been the strongest currency. performance of the G10 this year, up 4.7% versus the greenback. A stronger loonie generally hurts exporters, but the nature of the global economic recovery could help companies pass their higher currency costs onto customers, leaving exporters less hurt than in previous cycles. Oil, one of Canada’s top exports, hit a multi-year high at $ 71.24 per barrel. The Canadian 10-year rate s hit its lowest level since March 3 at 1.368% before climbing back to 1.380%, up almost a basis point on the day. (Reporting by Fergal Smith; editing by Jonathan Oatis)