The Fed has been cutting back on those purchases, a key element of stimulus that had kept long-term rates low, and said Wednesday it would further taper purchases by another US$10 billion a month to $55 billion.
Putting added pressure on the loonie were comments earlier in the week by the governor of the Bank of Canada that interest rate hikes in Canada could be further away than thought.
Stephen Poloz said that slower than normal growth may be the new norm. And he said those conditions will require central bankers to keep interest rates low for longer than they would have in the past. And, he added that a rate cut by the Bank of Canada could not be ruled out.
“The combination of a more dovish Governor Poloz and a less dovish Chair Yellen is a powerful near-term negative weight for the Canadian dollar,” said Camilla Sutton, chief FX strategist for Scotiabank.
via Financial Post
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