USD/CAD near Three Year High at 1.06 on Fed Wagers

The Canadian dollar traded at almost the weakest level in three years amid speculation Federal Reserve policy makers will decide at a two-day policy meeting to reduce their monthly bond-buying program.

The currency dropped for a second day against its U.S. peer even as Canadian factory sales unexpectedly increased in October. Canada’s currency closed at C$1.0684 on Dec. 4, the lowest since May 2010, after the Bank of Canada left interest rates unchanged and warned of low inflation. The Federal Open Market Committee signaled in October it may taper its stimulus program “in coming months” if the economy improves as anticipated.

“People are just trying to reduce risk ahead of the FOMC tomorrow,” Greg Anderson, global head of FX strategy at Bank of Montreal’s BMO Capital Markets, said by phone from New York. “If the Fed does taper, certainly dollar-CAD will go to C$107. People don’t want to be short dollar-CAD.” A short is a wager an asset will decline in value.

Bloomberg

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