C$ eases ahead of Fed state­ment

The Financial Daily - - INTERNATIONAL -

TORONTO: The Cana­dian dol­lar was weaker against the green­back on Wed­nes­day as oil prices re­treated and as in­vestors looked ahead to a US Fed­eral Re­serve pol­icy state­ment later in the day.

The US dol­lar re­couped some of the pre­vi­ous ses­sion's losses, climb­ing against a bas­ket of cur­ren­cies, but gains were tem­pered as in­vestors spec­u­lated the Fed could take a more dovish stance on rais­ing in­ter­est rates.

The US cen­tral bank's Fed­eral Open Mar­ket Com­mit­tee (FOMC) is sched­uled to re­lease its state­ment at the end of a two-day meet­ing on Wed­nes­day. It has been widely ex­pected to start

rais­ing rates by around midyear, even as cen­tral banks glob­ally have loos­ened mon­e­tary pol­icy to spur slug­gish growth.

"Cer­tainly we've had a di­ver­gence glob­ally," said Sco­tia­bank chief cur­rency strate­gist Camilla Sut­ton, adding that mar­kets will be look­ing out for the use of the words "pa­tience" and "con­sid­er­able time" in the Fed's lan­guage, which might sig­nal it is in no rush to hike rates.

"The com­bi­na­tion of hav­ing dis­in­fla­tion­ary pres­sure build­ing as well as a shift in the vot­ing mem­bers of the FOMC board to a slightly more dovish bias have all played into mar­ket psy­chol­ogy, but all in all, we're likely to see no ma­jor shift in pol­icy stance from the Fed."

At 9:26 a.m. (1426 GMT), the Cana­dian dol­lar was at C$1.2435 to the green­back, or 80.42 US cents, softer than Tues­day's close of C$1.2404, or 80.62 US cents.

The cur­rency has sta­bi­lized some­what af­ter last week's hefty losses, though an­a­lysts agree that the over­all trend of a weaker Cana­dian dol­lar re­mains firmly en­trenched.

Canada is a ma­jor oil pro­ducer and crude prices have been a key driver of the loonie in re­cent months. They slipped on Wed­nes­day fol­low­ing an in­dus­try re­port that said US crude stocks had the big­gest rise on record last week. -Reuters

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