Loonie Falls as Traders No Longer Expect Rate Change

The Canadian dollar continued its downward fall against the USD today, as the Forex traders expect no interest rate hike from the country’s central bank when it meets next time in two weeks.

The loonie (as the CAD is nicknamed) has reached its weakest mark against the US dollar since July 20 today. The likelihood that the Bank of Canada will go for a rate hike at its meeting on September 8 is dropping according to the overnight index swaps. The current target overnight rate of 0.75 percent is still attractive in the long-term (if compared to the 0–0.25 percent of US), but there were expectations for at least 25 basis point gain among the market participants.

The CAD has also reached it’s lowest level since November 2009 against the Japanese yen. But it’s hardly related to the weakness of the Canadian currency, as the yen is the Forex top-performer this year. During the beginning of the last week, the CAD was growing on the prospects of a possible acquisition of the Potash Corp. but now the future of this takeover is very unclear.

USD/CAD went up from 1.0492 to 1.0510 as of 19:25 GMT today. CAD/JPY declined from 81.56 to 81.06, while EUR/CAD dropped from 1.3330 to 1.3326 (as the euro performed even worse than the Canadian dollar today).

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