Loonie Falls against USD as Global Risk Aversion Rises


By TraderVox.com

Tradervox.com (Dublin) – The Canadian dollar slid against its US counterpart for the third day running as concerns about the slowing global economy decreased the demand for higher-risk assets like stocks and commodities. The Canadian dollar fell through parity to C$1.0029 which is the weakest it has been since February 27. This came just two days before the country’s central bank officials meet to set interest rates. Canada’s crude oil export weakened after a report showing that the Europe’s economy shrunk in the fourth quarter.

According to Jack Spitz, a Managing Director of Foreign Exchange at National Bank of Canada, in Toronto indicated that investors should keep an eye on C$1.0050 level which if broken could lead “long Canadian-dollar squaring.” He also suggested that another night of risk paring would lead to this attempt tomorrow.

The Loonie fell by 0.7 percent against the US dollar to settle at C$1.0019 at 5 p.m. in Toronto. During the day, the Canadian dollar had dropped to 0.8 percent which is the lowest it has been on intraday trading since Feb. 10.

The Canadian dollar continues to drop due to factors such as the declining of the Europe’s economy by 0.3 percent in the fourth quarter; the data released yesterday showing that the US factory orders declined and China recording the lowest growth since 2004. This has forced the market to retreat putting risk appetite under pressure. Therefore, currencies related with risk appetite or commodities such as the Loonie are underperforming.

Some analysts are forecasting that the Bank of Canada will leave the interest rates at one percent where they have been since 2010. According to policy makers led by Mark Carney, there is a possibility that the growth in Canada and US will remain modest than it had been forecasted in October. Europe’s effort to contain the debt crisis will play a big role in maintaining this positive growth. According to some analysts, the Bank of Canada will not make any surprise decisions on it March 8 meeting hence the Canadian dollar might remain relatively steady.

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