The Canadian dollar fell to a seven-week low after the Federal Reserve maintained its $85 billion in monthly bond purchases while leaving open the possibility for future reductions by saying economic growth persists.
The currency weakened versus most of its 16 major peers as the U.S. central bank removed a sentence from the previous policy announcement that had said tighter financial conditions could slow the improvement in the economy, Canada’s largest export market. Canada’s dollar posted its biggest weekly drop against the greenback in four months last week after the Bank of Canada lowered economic growth estimates and removed language about the need for higher interest rates it had kept in every policy statement for more than a year.
“In view of the fact they see growth continuing without any major red lights, it’s conceivable they could look to cut back on the bond buying in December,” said Don Mikolich, executive director of foreign exchange sales at Canadian Imperial Bank of Commerce, by phone from Toronto. “So where the market really started to push off tapering into the new year, the suggestion it could happen sooner did evoke a bit of a reaction.”
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