C$ weakens on lower oil prices, pares losses after Fed decision
By Fergal Smith
TORONTO (Reuters) - The Canadian dollar weakened to a new 11-1/2-year low against its U.S. counterpart on Wednesday as crude oil prices fell, but the currency recovered somewhat after the U.S. Federal Reserve raised rates for the first time in more than nine years.
Oil prices headed back toward 11-year lows, pressured by U.S. government data showing a huge build in crude inventories, while the greenback was stronger against a basket of currencies after the Fed news. [O/R] [USD/]
U.S. crude CLc1 prices settled down 4.9 percent at $35.52 a barrel, while Brent crude LCOc1 lost 3.3 percent to $37.18.
The U.S. dollar rallied initially following "a somewhat more hawkish Fed than the markets had anticipated," according to Derek Holt, vice president of economics at Scotiabank.
At 2:59 p.m. EST (1959 GMT), the Canadian dollar CAD=D4 was trading at C$1.3765 to the greenback, or 72.65 U.S. cents, weaker than Tuesday's close of C$1.3738, or 72.79 U.S. cents.
The currency's strongest level of the session was C$1.3729, while its weakest level was C$1.3848, a fresh 11-1/2-year low.
Its initial reaction on the Fed announcement was to weaken, but it pared losses after failing to breach the session low.
The Fed made clear the rate hike was a tentative beginning to a "gradual" tightening cycle, and that in deciding its next move it would put a premium on monitoring inflation, which remains mired below target. Continued...