The Canadian dollar weakened to C$1.10 for the first time in more than four years amid speculation the U.S. Federal Reserve will slow its monetary stimulus as the Bank of Canada signals more may be on the way.
The currency sank against most major peers before a central-bank rate decision tomorrow that will follow weaker-than-forecast economic reports this month. The bank may signal in a policy statement it favors lower interest rates, only three months after dropping a bias toward higher rates. The Fed will keep reducing monthly bond purchases it makes to spur economic growth, according to economists in a Bloomberg survey.
“The impression these two central banks are going in opposite directions really takes the stuffing out of the Canadian dollar,” David Tulk, chief macro strategist at Toronto-Dominion Bank’s TD Securities, said from Toronto in a phone interview. “The next logical step is for the bank to adopt an outright easing bias. Instead of the long-held view that the next move by the Bank of Canada would be up, that it would be down.”
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