Canadian Dollar Drops Against the US Dollar as Fed avoids Stimulus

Submitted by Tradervox 2 on Fri, 03/08/2012 - 16:30
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Tradervox.com (Dublin) – The Canadian dollar fell yesterday against the US dollar after Federal Reserve failed to impress investors who were waiting for better signs of additional quantitative easing program. In a statement to the press, the Federal Open Market Committee said it is committed to keeping interest rates at the current “near zero” levels through to late 2014. The statement also indicated that the FOMC is committed to providing additional stimulus if need arises. However, this has not impressed investors who were speculating that the Fed would give a clear signal on when to expect third round of quantitative easing.

The Canadian dollar dropped by 0.3 percent against the dollar to trade at C$1.0055 at the close of trading in Toronto on Wednesday, the currency had earlier touched its strongest level since May 15. The drop also came as the Standard & Poor’s 500 Index dipped 0.3 percent after it had added 0.4 percent earlier. As Blake Jespersen, the Managing Director of Foreign Exchange at Bank of Montreal in Toronto, indicated, owning the greenback is a good risk-reward trade with such an event.

However, the Canadian currency is headed for a weekly gain, after the US job report showed a better than expected figure. A report from Labor Department in Washington indicated that employers added 163,000 workers on their payrolls in July against a 100,000 market expectation. The loonie increased by 0.7 percent to trade at C$1.0001 against the dollar after it had advanced to 99.97 cents earlier.  

According Shaun Osborne who works at Toronto Dominion Bank, the Canadian dollar is headed for its fourth weekly gain against the US dollar. He added that the strength of the payrolls has diminished disappointing Fed and ECB decisions, but investors are confident of the potential for Federal Reserve to react if need arises.

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