Canadian Dollar Weakens on Concerns About US Economic Health

The Canadian dollar dropped today as the poor economic reports from the US caused the concerns about the effect of the quantitative easing on the US economy and decreased the attractiveness of the currencies related to the economic growth.

The Federal Reserve announced on November 3rd the so-called quantitative easing. The Fed said it plans to purchase $600 billion in Treasuries through June to bolster the employment and the inflation. These plans received the tremendous amount of the criticism as many economists thought that the excessive stimulus would cripple the economy rather than aid it. It’s too early to tell about the effect of the easing on the US economy, but the declining CPI and other poor economic data definitely didn’t improved the opinion of those who negatively perceived the easing.

The US economy has a great influence on Canada as the US is Canada’s largest trading partner. The data from Canada itself also isn’t encouraging. The manufacturing sales in Canada decreased 0.6 percent in September, following the 2.0-percent increase in August. The report tomorrow on the wholesale sales expected to show that the growth of the sales considerably slowed.

USD/CAD rose from 1.0233 to 1.0237 as of 20:33 GMT after it dropped earlier as low as 1.0180. EUR/CAD advanced from 1.3790 to 1.3836, following the decline to the intraday low of 1.3760.

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