Canadian dollar firms after Bernanke speaks; NDP rally weighs

Wed Apr 27, 2011 4:58pm EDT
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By Solarina Ho

TORONTO (Reuters) - Canada's currency closed stronger against the U.S. dollar on Wednesday after struggling for much of the session, helped by the greenback's broadbased slide after an unprecedented press conference by the head of U.S. Federal Reserve.

The U.S. dollar fell against the euro and most other major currencies on Wednesday after the Fed said it will end its bond-buying program in June as planned and appeared in no rush to tighten monetary policy further.

Fed chairman Ben Bernanke said there was less momentum in the economy, but said the first quarter slowdown was "transitory."

"If anything, the comments sounded slightly softer on the economy and there's no reason to think the Fed's moving anytime soon on interest rates," said Shane Enright, executive director, foreign exchange sales at CIBC.

"The market positioning is certainly short-U.S. dollar, not only against Canada, but across all the currencies right now."

After waffling weaker for much of the session, the Canadian dollar pared losses following the FOMC statement and finished the session at C$0.9504 the U.S. dollar, or $1.0522, stronger than Tuesday's North American finish of C$0.9518.

The U.S. central bank is lagging other countries in tightening its monetary policy. The European Central Bank and China have both taken steps to cool their economies and the Bank of Canada is widely expected to resume raising interest rates as early as this summer.

Higher interest rates often support currencies because they tend to attract international capital flows.   Continued...