CAD Falls Below Parity with USD After Fed Statement

Yesterday’s monetary policy statement of the Federal Reserve had a very negative effect on the Canadian dollar. The growth-linked currency posted the biggest decline since May 2010 today, dropping below parity with the US dollar for the first time since January 2011.

The Fed announced yesterday that it’s replacing its short-term debt with longer-maturity securities. The US central bank mentioned about “significant downside risks” to the US economic growth. Commodities and stocks plunged after the announcement and the loonie, being the “commodity” currency, followed them in decline. The Canadian currency is often called “the loonie” for the image of the aquatic bird on the C$1 coin.

The Standard & Poor’s 500 Index dropped 3.3 percent. Futures for delivery of crude oil in November slumped as much as 6.7 percent to $80.13 per barrel in New York. The Thomson Reuters/Jefferies CRB Index of commodities slid 4.4 percent.

USD/CAD surged from 1.0081 to 1.0276 today as of 20:53 GMT and reached earlier 1.0360, the highest price since October 2010. EUR/CAD climbed from 1.3679 to 1.3834, following the advance to the intraday high of 1.3930, the highest since September 7. CAD/JPY tumbled from 75.79 to 74.08, while earlier it reached the lowest level since February 2009 — 73.56.

If you have any questions, comments or opinions regarding the Canadian Dollar,
feel free to post them using the commentary form below.