Canadian Dollar Extends Rally Before Fed Statement

The Canadian dollar continued to gain this Wednesday versus the greenback as demand for commodities produced in Canada and stocks worldwide gained significantly, raising attractiveness for the loonie even further, after several sessions of losses during the past week.

The Federal Reserve is likely to post statements regarding monetary policy in the U.S. this Wednesday, and according to virtually all economists, rates are likely to remain unchanged, which is good for the Canadian dollar, since a Fed rate hike would decrease the appeal for the Canadian currency substantially. The loonie is one of the most stock-linked currencies, and today, after positive bank earnings in Europe, stocks rallied worldwide, adding reasons for investors to return their positions in Canada, previously sold last week following Bank of Canada declarations that a strong currency would impact negatively the economic recovery of the North American nation, halting a rally that set the Canadian dollar to levels near parity with its U.S. counterpart.

The Canadian dollar has still further room to increase, but investors became rather skeptical to invest sharply in Canada, as the Bank of Canada has been stressing frequently that a strong currency is unwelcome in the country, fact which is likely to limit the loonie’s rally even if its fundamental outlook is bullish.

USD/CAD traded at 1.0632 as of 16:29 GMT from a previous rate of 1.0675 yesterday. CAD/JPY traded at 85.47 from 84.54.

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