Finance Markets

July 11, 2006

Canadian dollar declines

Filed under: Forex, USD, GBP, Euro, Economy, Yen

The Canadian dollar saw declines on Tuesday as the Bank of Canada not only elected to keep interest rates at their current level, but issued comments leading most analysts to the conclusion that no new rate hikes will be coming anytime soon and that the loonie will not strengthen significantly for some time.

The Canadian currency dropped 0.9 percent to C$1.1339 in relation to the US dollar, after dropping a similar amount on Monday. This, after having reached a 28-year high against the greenback when it hit C$1.095 in late May.

Meanwhile, the US dollar held its position against other major currencies as traders waited for new US trade data, due later in the day. In a sign, however, that the US currency is losing its status as reserve currency to the world, Syria announced that it will end its peg to the dollar by the end of the year. It has already put half of its $4.1 billion reserve into the euro, signaling its closer trade links to Europe.

The euro was 0.1 percent stronger in relation to the greenback, to $1.2751, while sterling remained essentially unchanged at $1.8425 after early losses when it was announced that the UK trade deficit had increased from £3.4 billion in April to £4.4 billion in May.

The Australian dollar added 0.7 percent to $0.7522 versus the US dollar, while it also was up 0.7 percent against sterling to A$2.3384. The Aussie dollar was also up in relation to the Japanese yen, to ¥85.86.

The Polish zloty was up 0.4 percent to 4.0308 as political nervousness in the wake of last week’s resignation of the prime minister lessened. Elsewhere, the Icelandic krona was up 1.2 percent to IKr74.43 to the US dollar on rumors that the interest rate there will go up again next month. The Icelandic interest rate currently stands at 13 percent.

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