Canadian greenback falls 0.9% towards the buck
Touches its weakest since March 2020 at 1.4444
CAD 3-month implied volatility rises to six.6
Canadian bond yields rise throughout the curve
(Updates costs and particulars on exercise)
TORONTO, Dec 18 (Reuters) – The Canadian greenback tumbled to a close to five-year low towards its U.S. counterpart on Wednesday as hawkish steerage from the Federal Reserve boosted the buck and buyers sought safety towards extra losses for the Canadian forex.
The loonie was buying and selling 0.9% decrease at 1.4440 to the U.S. greenback, or 69.25 U.S. cents, after touching its weakest intraday stage because the onset of the COVID-19 disaster in March 2020 at 1.4444.
The U.S. greenback jumped towards a basket of main currencies after the Fed delivered a broadly anticipated rate of interest minimize whereas additionally indicating it might gradual the tempo of its financial coverage easing cycle.
“We knew it was going to be a hawkish minimize at the moment. … It is uber-hawkish,” mentioned Erik Bregar, director, FX & treasured metals threat administration at Silver Gold Bull.
“No one likes it. Shares do not prefer it, bonds do not prefer it, treasured metals do not like, the risk-sensitive Canadian greenback would not prefer it. The one factor up is the U.S. greenback.”
Home political uncertainty has weighed on the Canadian forex in latest days, becoming a member of the specter of U.S. commerce tariffs and the Financial institution of Canada’s aggressive rate of interest slicing marketing campaign as headwinds for the forex.
“Demand for defense towards a draw back transfer within the loonie has soared,” mentioned Karl Schamotta, chief market strategist at Corpay.
Implied volatility on an at-the-money choices contract to purchase or promote Canadian {dollars} towards the U.S. greenback in three months climbed to roughly 6.6, its highest stage since April 2023. It was 4.5 in July.
Traders and firms use choices to hedge their forex publicity. The forex touched a low of 1.4667 in March 2020.
Canadian bond yields rose throughout the curve, monitoring strikes in U.S. Treasuries. The ten-year was up 8.2 foundation factors at 3.224%. (Reporting by Fergal Smith; Enhancing by Chizu Nomiyama and Jonathan Oatis)
