Loonie Down for Third Day on Fed Speculation

Canadian dollar is declining against the US dollar for the third day in a row as the Federal Reserve begins its two-day meeting. The expectation that the Fed could begin reducing its asset purchases is lending strength to the greenback against the loonie.

Canadian dollar did get a bit of a boost earlier in anticipation of a speech expected soon from Stephen Poloz, the new governor of the Bank of Canada. However, loonie is losing ground now as Forex traders consider the impact of an improving US economy.
If the Federal Reserve makes an announcement about tapering off its asset purchases, reducing the stimulus efforts because the US economy is on the road to recovery, that means a stronger greenback — and a lower loonie. Right now, Forex traders are considering that possibility.
Traders will also be interested to see what Poloz says, and to gauge what might be next in terms of Bank of Canada policy. The Canadian economy has been flagging a bit, and there is still a housing bubble to worry about. As a result, the loonie’s strength could be waning.
At 14:01 GMT USD/CAD is up to 1.0206 from the open at 1.0185. EUR/CAD is up to 1.3364 from the open at 1.3615. GBP/CAD is down to 1.5931 from the open at 1.6014.

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