Dramatic fall in Loonie

This article was last updated on April 16, 2022

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Value of the Canadian dollar fell overnight, following its first close at less than parity with the U.S. greenback since January, and was at less than 97 cents US Thursday morning. At 7:15 a.m. ET, the loonie was recorded at 96.62 US, which was 2.79 cents less than Wednesday’s close of 99.41 cents US. Since January, it’s the first time the loonie closed at less than $1 US.

The virtual decline of the Canadian dollar is mainly because of the gains in the U.S. dollar, as financiers look for almost risk-averse investment after the U.S. Federal Reserve said that there are “significant downside risks” in the economy. The U.S. dollar climbed to a seven-month high against important currencies as a wide aversion to risk.

BMO Capital Markets economist Benjamin Reitzes said: “Confidence was already shaky, at best, and the Fed’s words only heightened worries about the outlook.”

David Watt, senior currency strategist at Royal Bank of Canada said: “I’d be surprised if it gets towards C$1.05, but you’re in an environment where the market is extremely uncertain and in periods of uncertainty, especially given the global macro backdrop, people are going to go to their safe havens … and right now that is the U.S. dollar, even though nobody has a strong positive view of the U.S. Be prepared for it to roll over, but at the same time don’t stand in the way because we just don’t see what is going to backstop confidence at the present time.”

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