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Canadian Dollar Impacts Near 2-year Low

Canadian Dollar Impacts Near 2-year Low
Photo Collected From: CBC

The Canadian dollar fell to its lowest level in nearly two years against the greenback on September 16, 2022, and Canada’s stock market fell as investors increased cautious ahead of domestic inflation data and a Federal Reserve interest rate decision in September. The Canadian dollar was trading 0.3% lower at 1.3270 per US dollar, or 75.36 US cents, after connecting its weakest since November 2020 at 1.3307. The loonie was down 1.8 percent for the mid-week of September, its most significant weekly decline since June. The article is about Canadian Dollar Impacts Near 2-year Low.

It observes hotter-than-expected US inflation data that spooked financial markets globally and pushed the US dollar sharply higher against a basket of significant currencies. “The dollar is an unstoppable juggernaut currently, with higher-than-expected inflation and an ever-more-hawkish Federal Reserve sucking capital in the United States and inflicting damage on the rest of the world economy,” stated Karl Schamotta, Chief Market Strategist of Corpay.

Money markets expect the Fed to hike interest rates by three-quarters of a percentage rate within September 21, 2022. The World Bank confirmed the global economy might be inching toward a recession. Canada is a significant exporter of commodities, that includes oil, so the loonie tends to be particularly sensitive to the worldwide economic outlook. In a signal that investors expect a recession, the inversion of Canada’s yield curve increased highly. The 10-year yield fell 68 basis points under the 2-year yield after it touched its highest intraday level since December 2007 at 3.870 percent. Canada’s inflation data for August 2022 is due on September 20, 2022, with all eyes on measures of underlying price pressures.

The cautious mood spilled over to the stock market, with both Wall Street and the Toronto stock market trading lower. “The markets are in a bit of a risk-off mode,” stated Greg Taylor, a portfolio manager at Purpose Investments. “The big risk is that we’re starting to see some earnings warnings from companies as the economy begins to slow down.” The Toronto Stock Exchange’s S&P/TSX composite index ended down 0.9 percent at 19,385.88, its lowest closing level since September 7, including declines in technology, energy, and financial shares. However, for the week, the index lost 2 percent.

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