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Canadian dollar hits seven-week low as Fed guidance rattles markets

06/17/2021 | 04:54pm EDT
FILE PHOTO: A Canadian dollar coin, commonly known as the

TORONTO (Reuters) - The Canadian dollar weakened for a third day against its broadly stronger U.S. counterpart on Thursday, after a hawkish shift in guidance by the U.S. Federal Reserve startled investors.

The loonie was trading 0.6% lower at 1.2355 to the greenback, or 80.94 U.S. cents, adding to declines on Tuesday and Wednesday. It touched its weakest level since April 28 at 1.2378.

"The Canadian dollar was hammered as the prospect of two U.S. rate hikes erased the advantage the currency had benefited from when it was just the Bank of Canada forecasting rate increases," Rahim Madhavji, president at KnightsbridgeFX.com, said in a note.

A majority of 11 Fed officials penciled in at least two quarter-point rate increases for 2023 in a surprise move on Wednesday, boosting the U.S. dollar to a two-month high against a basket of major currencies.

Previous guidance was for the first hike to come in 2024.

Canada is a major producer of commodities, including copper and oil, which have benefited from Federal Reserve stimulus.

Copper prices fell to their lowest level in two months, while oil settled 1.5% lower at $71.04 a barrel.

The Bank of Canada is starting to see signs that the country's red hot housing market is cooling down, although a return to a normality will take time, Governor Tiff Macklem said on Wednesday.

Canadian home prices accelerated again in May from the previous month, posting the largest monthly rise in the history of the Teranet-National Bank Composite House Price Index, data showed on Thursday.

Data from Statistics Canada showed that foreign investors bought a net C$9.95 billion in Canadian securities in April, led by government bonds.

Canadian government bond yields were mixed across a flatter curve. The 10-year yield eased 4.8 basis points to 1.394%, erasing much of the previous day's move higher.

(Reporting by Fergal Smith, Editing by Nick Zieminski and Aurora Ellis)

By Fergal Smith

ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / CANADIAN DOLLAR (AUD/CAD) -0.27% 0.92125 Delayed Quote.-5.21%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) 0.15% 0.73876 Delayed Quote.-4.28%
BRITISH POUND / CANADIAN DOLLAR (GBP/CAD) 0.06% 1.74201 Delayed Quote.0.57%
BRITISH POUND / US DOLLAR (GBP/USD) 0.46% 1.39699 Delayed Quote.1.52%
CANADIAN DOLLAR / JAPANESE YEN (CAD/JPY) 0.28% 88.008 Delayed Quote.7.51%
CANADIAN DOLLAR / SWISS FRANC (CAD/CHF) 0.13% 0.72737 Delayed Quote.4.55%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) 0.43% 0.80177 Delayed Quote.1.14%
EURO / CANADIAN DOLLAR (EUR/CAD) -0.11% 1.48179 Delayed Quote.-4.20%
EURO / US DOLLAR (EUR/USD) 0.30% 1.18829 Delayed Quote.-3.22%
INDIAN RUPEE / US DOLLAR (INR/USD) 0.31% 0.013465 Delayed Quote.-1.96%
LONDON BRENT OIL 0.51% 75.16 Delayed Quote.44.56%
NEW ZEALAND DOLLAR / CANADIAN DOLLAR (NZD/CAD) 0.07% 0.87211 Delayed Quote.-4.02%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) 0.49% 0.69937 Delayed Quote.-3.02%
US DOLLAR / CANADIAN DOLLAR (USD/CAD) -0.37% 1.24698 Delayed Quote.-1.08%
WTI 0.51% 72.767 Delayed Quote.49.35%
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