Canadian Dollar Rises Against U.S. Dollar Following Fed Announcement
The loonie is rebounding from session lows against the U.S. dollar on Tuesday morning after the Federal Reserve made an unprecedented move in an effort to combat liquidity issues at the forefront of the ongoing financial sector crisis.
Using its powers during times of turmoil, the Fed announced the creation of the Commercial Paper Funding Facility, which will allow the Fed to purchase three-month unsecured commercial paper. The Fed said it is working with the Treasury Department, which believes the creation of the facility will help prevent substantial disruptions to the financial system and economy.
The Canadian dollar is down 0.0018 to 0.9076 against the U.S. dollar, after it had been at session lows of 0.9028 when the announcement was made at 9 a.m. EDT. ScotiaMcLeod Wealth Adviser Andrew Pyle wrote in a reactionary e-mail how the move has already caused commercial paper rates to fall.
“The logic here is that this will…alleviate some of the concerns that companies will not be able to fund operations or pay back maturing commercial paper. The icing on the cake this week will be a coordinated series of official rate cuts by the Fed, [European Central Bank], Bank of England and Bank of Canada (as well as others),” he wrote, calling the move a positive development.
Citigroup FX strategists believe that yesterday’s close of 1.0931 suggests strong potential for further USD/CAD (1.1018) gains in the short term.
“Note however that the 200 wma comes in at 1.1165 which is likely to provide some resistance,” they wrote.
The euro is up 0.0221 to 1.5063 and the pound sterling is up 0.0204 to 1.9378, both against the Canadian dollar. The Canadian dollar is up 0.628 points to 93.2425 against the yen and down 0.0130 to 1.2463 against the Australian dollar.
CAD/USD up 0.0118 to 0.9418.
EUR/CAD up 0.0004 to 1.5055.
CAD/JPY up 1.76 to 101.42.
GBP/CAD up 0.0110 to 1.9012.
CAD/AUD down 0.0017 to 1.1503.
