Business

The Canadian Press - ONLINE EDITION

Canadian dollar lower, Fed minutes raise questions about length of stimulus

By: Malcolm Morrison, The Canadian Press

Posted: 02/21/2013 7:48 AM | Comments: 0 | Last Modified: 02/21/2013 3:29 PM

Canadian dollars, or loonies, sits on their American counterparts in this Sept. 20, 2007 photo in Montreal. THE CANADIAN PRESS/Paul Chiasson

TORONTO - The Canadian dollar fell to a fresh seven month low against the greenback Thursday amid concerns over how long the U.S. Federal Reserve will continue its current stimulus program of bond purchases.

The loonie was down 0.14 of a cent to 98.16 cents US and went as low as 98 cents as traders avoided risk and resource-based currencies such as the loonie.

The release of the minutes from the Fed’s last policy meeting showed some policy-makers were worried that the bank’s US$85 billion in monthly bond purchases could eventually unsettle financial markets or cause the central bank to take losses.

The purchases, commonly known as quantitative easing, are designed to boost the U.S. economy by increasing liquidity in financial markets.

"The take-aways of the minutes are important as they suggest that there is increased concern over QE, particularly with how it might complicate the ultimate withdrawal from asset purchases in the future," observed Scotia Capital chief currency strategist Camilla Sutton.

The Fed said it would review its asset purchases program at its March meeting.

Traders flocked to the perceived safe haven of U.S. Treasuries following the release of the Fed minutes Wednesday, pushing the greenback higher and commodities lower.

A higher U.S. dollar pressures commodities because a stronger greenback makes it more expensive for holders of other currencies to buy oil and metals, which are dollar-denominated.

The April crude contract on the New York Mercantile Exchange lost $2.38 to US$92.84 a barrel on top of a $2 slide Wednesday.

Oil prices were also undercut by data showing U.S. oil inventories rose last week by a much more than expected 4.14 million barrels.

Copper prices were down sharply for a second day with the March contract on the Nymex off five cents at US$3.55 a pound, adding to a four-cent fall Wednesday.

Gold prices surrendered earlier minor gains to move lower for a seventh straight day. The April contract edged closed down 60 cents to US$1,578.60 an ounce after closing at a seven-month low Wednesday.

The latest declines in bullion prices were sparked by the Fed minutes because the central bank's quantitative easing has supported gold. That is because the bond buying program has encouraged worries about rising inflation and gold is seen as a hedge against rising prices.

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories? Please use the form below and let us know.

* Required

In which story did you find the error? *
Please post the headline of the story or the title of the video with the error.
What was the error? *
Please post exactly what was wrong with the story.
What should we have written?
Please indicate your source for the correct information.
Who else should we interview to improve this story?
Please include any contact information you may have.
Can we contact you in the future for advice on stories about this topic?
Yes

No
First Name: *
Last Name: *
E–mail Address: *
This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.
Phone: *
This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.
Colour:
Are you blue? If you can see this, leave it blank and get some CSS support.
Enter the words that you see: * This is to prevent our forms from being filled out automatically.
You have failed to correctly identify the words in the box above. Please try again.

More Business

Undock

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is register and/or login and you can join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.