The Canadian dollar continued to decline today reaching the lowest level in five weeks as risk aversion rose globally, fueled by China’s new restrictive loans policy, which is likely to decrease appeal for currencies like the loonie, extreme related to commodities and stocks performance.
As China’s announcements regarding new tightening lending conditions for financial institutions started to affect bank loans in the country, risk aversion continued to move the loonie rates down as Canada’s economic growth for 2010 will rely on the global economic recovery, since the country’s raw materials production is mainly directed to exporting markets. The crude oil, one of the main sources of revenue for the Canadian trade balance, posted another drop today as traders fear that lending limitations in China may slow down the economy and consequently the demand for energy globally, forcing energetic commodities down as well this Tuesday.
Forecasts for the global economy are getting more uncertain by the day, and the Canadian dollar has been affected by this shift in market sentiment. Even if some currency specialists judge the current loonie rates as below their real value, the Canadian dollar may touch new record lows as long as demand for commodities decline.
USD/CAD traded at 1.0621 as of 23:32 GMT from a previous rate of 1.0543 yesterday. CAD/JPY traded at 84.33 from 85.48.
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