Skip to main content

The Globe and Mail

Loonie ends higher after steep loss in wake of Fed tapering decision

Canadian dollars.

Jonathan Hayward/The Canadian Press

The Canadian dollar erased early losses to close higher Thursday, clawing back some of the substantial loss it suffered after the Fed moved to start winding up a key stimulus program.

The loonie gained 0.21 of a cent to end at 93.76 cents (U.S.) following a tumble of almost three-quarters of a cent Wednesday after the Federal Reserve's announcement that it would cut back on bond purchases sent the U.S. currency higher. The loonie had drifted below 93.3 cents earlier Thursday to a 3 1/2-year low.

The Fed said it was cutting its monthly bond and asset purchases to $75-billion starting in January, down $10-billion from where they have been. The U.S. central bank said further cuts would depend on economic data, particularly jobless levels and inflation.

Story continues below advertisement

The Fed also emphasized that short-term rates aren't going up any time soon.

The tapering of asset purchases will be the first step toward winding down a program that has been in place since the 2008 financial crisis.

The quantitative easing kept long-term rates low and supported strong gains on many equity markets this year.

U.S. bond prices fell, sending yields higher. The yield on the 10-year Treasury note rose to 2.94 per cent, up from 2.87 per cent prior to the Fed's announcement.

On the commodity markets, bullion prices resumed sliding after the Fed move. The bond buying had supported gold prices because of inflationary fears. But inflation is tame in many countries and data out earlier this week showed the U.S. consumer price index rising at an annual rate of only 1.2 per cent, significantly below the Fed's inflation target of 2 per cent.

The February gold contract on the New York Mercantile Exchange fell $41.40 to $1,193.60 an ounce, its lowest close since Aug. 3, 2010. Gold prices are down 29 per cent so far this year Elsewhere, January crude gained 97 cents to $98.77 a barrel while March copper slipped 2 cents to $3.30 a pound.

Report an error
Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

Please note that our commenting partner Civil Comments is closing down. As such we will be implementing a new commenting partner in the coming weeks. As of December 20th, 2017 we will be shutting down commenting on all article pages across our site while we do the maintenance and updates. We understand that commenting is important to our audience and hope to have a technical solution in place January 2018.

Discussion loading… ✨