Loonie Weakens as Fed Doesn’t Announce QE3

The Canadian dollar fell yesterday and remained weak today after the US Federal Reserve refrained from performing another round of quantitative easing, supporting the US currency. The negative sentiment about Europe also continues to put downward pressure on Canada’s currency.
The Federal Open Market Committee performed yesterday its last meeting this year. The FOMC reiterated its pledge to keep the interest rates exceptionally low, but didn’t mention additional stimulus. The Committee said that the US economy improves, albeit at moderate pace. The announcement boosted the dollar, which was subdued by the expectations of a next round of quantitative easing, and put pressure on other currencies.
There were rumors that the European leaders agreed to keep the current €500 billion cap on the European Stability Mechanism. That was another disappointment for market participants.
The Standard & Poor’s 500 Index fell 0.9 percent, following the previous advance by 1.1 percent, while the S&P/TSX Composite Index dropped 1.2 percent.
USD/CAD traded at 1.0335 today as of 3:24 GMT, following yesterday’s advance from 1.0267 to 1.0336. EUR/CAD traded near 1.3473, while CAD/JPY was at about 75.35.

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