USD/CAD Around 1.06 Amid Bets on Fed Impact

The Canadian dollar traded at almost the lowest level in three years amid speculation it will weaken against its U.S. counterpart as the Federal Reserve prepares to reduce stimulus.

The currency fell against the majority of its 16 most-traded peers before a two-day Fed meeting begins tomorrow to consider changes to its $85 billion-a-month bond-purchase program that depressed borrowing costs to help jump start an economic recovery. The purchases have tended to devalue the U.S. dollar. Existing home sales fell for a second month in November, adding to evidence the market has begun to cool.

Under Governor Stephen Poloz, the Bank of Canada has shifted its focus to the risk of low inflation amid a stalling economic recovery, spurring bets it will keep rates on hold as the Fed trims bond-buying. The policy statements of predecessor Mark Carney included warnings that higher rates would “become appropriate” to deter consumers from racking up debt.

Bloomberg

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