Loonie down, U.S. dollar up , traders hope for stimulus clarity from Fed meeting

TORONTO – The Canadian dollar was lower Tuesday while the greenback advanced ahead of the start of a two-day meeting by the Federal Reserve.

The loonie was down 0.18 of a cent to 98.08 cents US.

Traders hope the meeting and a news conference Wednesday afternoon by Fed chairman Ben Bernanke will provide clarity on whether the central bank thinks that it can start to slowly let up on its program of bond purchases, which has been aimed at keeping interest rates and yields low.

The program, involving the purchase of US$85 billion of bonds every month, has also helped fuel a strong rally on stock markets.

Markets have been volatile since late May when Fed chairman Ben Bernanke first mooted the possibility of the central bank tapering its bond purchases.

On the economic front, traders also looked to key U.S. inflation and housing data coming out during the morning.

Analysts believe housing starts likely jumped more than 10 per cent in May to 940,000 annualized units. Building permits are expected to have slipped to 967,000 annualized units.

Inflation figures are expected to show the annual rate for May will rise to 1.4 per cent from the previous month’s 1.1 per cent.

Commodity prices were mixed with the July crude contract on the New York Mercantile Exchange down 17 cents to US$97.94 a barrel.

July copper fell three cents to US$3.17 a pound while August bullion gave back $11.10 to US$1,372 an ounce.