The Canadian dollar dropped on Forex today, mainly against the U.S. dollar and the Japanese yen, as the investors favored less commodity-dependent currencies.
Commodities fell down during the European session and continued to fall during the New York trading session. Crude oil, gold and copper declined, as the traders were concerned with the slowdown of the U.S. economy.
Its an interesting situation when the both high-yielding and low-yielding currencies depreciate. Those that yield higher interest rates are sold because they are risky and the investors dont want to hold risky assets during the times of the global financial instability. Those that are low-yielding, but are commodity-dependent, lose because the commodity-consuming countries are risking to fall into the recession.
Recently the Bank of Canada reduced the benchmark interest rate by 50 basis points from 4.00% to 3.50%. And it will probably cut the rate again during the next meeting. But the loonies Forex rate probably wont be determined by this decision.
USD/CAD gained almost 0.9% today and went up from 0.9888 at the days opening in Asia to 0.9974 as of 18:24 GMT.
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