Reasons for Decline of Canadian Dollar to Fresh Lows

The Canadian dollar dropped to the fresh lows against its US peer during the Thursday’s session and also fell against some other majors including the euro. The currency has plenty of reasons for its weakness, both domestic and global.

The major reason for the loonie’s weakness is the strength of the greenback after yesterday’s monetary policy announcement from the Federal Reserve. While US policy makers still talked about patience in approach to monetary tightening, they changed the wording regarding economic growth in the United States to “strong” from “solid”. Additionally, the record low US unemployment claims provided further boost to the US currency.

Turning to fundamentals specific for the Canadian currency, the continuous decline of prices for crude oil is definitely a major drawback for the currency of Canada — the oil-exporting country. And even though prices bounced right now, they dipped below the $44 per barrel level intraday. As a result of negative impact of falling oil prices on Canada’s economy, economists expect that Friday’s report about Canadian GDP will show a decline of 0.1 percent.

USD/CAD rallied from 1.2531 to 1.2621 as of 22:53 GMT today, rising to 1.2677 intraday — the highest rate since April 2009. EUR/CAD advanced from 1.4146 to 1.4288. CAD/JPY traded close to its opening level of 93.75.

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