Canadian forex review: C$ down sharply after US Fed announcement

By Commodity News Service Canada

WINNIPEG, Dec. 18 – The Canadian dollar closed sharply lower against its US counterpart following the US Federal Reserve’s announcement Wednesday.

The US Federal Reserve announced they will start to ease stimulus measures starting in January 2014. They will cut their bond purchases down by US$10 billion, to $75 billion per month.

The Canadian currency closed at US$0.9355 or US$1=C$1.0689 on Wednesday, which compares with Tuesday’s North American settlement of US$0.9425 or US$=C$1.0610.

Further downward pressure on the loonie came from the declines seen in gold prices, one of Canada’s largest exports, analysts said.

However, some short covering ahead of the holidays and New Year helped to limit the downside, as did strength in crude oil values.

Positive Canadian sales data was also supportive. Statistics Canada reported that wholesale sales were up 1.4 per cent to C$50.5 billion in October, which was better than an expected 0.3 per cent jump.

Canadian bonds were mostly lower, following choppy activity as traders reacted to the US Federal Reserve’s decision to taper bond purchases next month, brokers noted.

The two-year bond yielded 1.108% late Wednesday, from 1.109% late Tuesday. The 10-year bond yielded 2.682%, from 2.642%. Bond yields fall as their prices rise.