Canadian dollar advances, traders look to Fed statement, Poloz speech

TORONTO – The Canadian dollar was slightly higher Wednesday ahead of the mid-afternoon release of the U.S. Federal Reserve’s latest policy statement and economic projections.

It is hoped the Fed will shed some light on what it intends to do about curbing some of its economic stimulus.

The loonie was up 0.06 of a cent to 98.02 cents US as markets also looked to a speech later in the day by Bank of Canada governor Stephen Poloz. The topic is “Recovery: Rebuilding Business Confidence in Canada”.

Poloz has only been on the job since June 3 and traders will want to see how he potentially differs in tone from his predecessor, Mark Carney, who left the central bank’s top job to take over as governor of the Bank of England.

Meanwhile, the Fed statement has been much anticipated as a cloud of uncertainty settled over markets after Bernanke first mentioned the possibility of tapering the Fed’s monthly purchases of US$85 billion of bonds during congressional testimony May 22. Analysts don’t expect the Fed to make a move on tapering just yet. But uncertainty over whether the Fed feels economic conditions are appropriate for such easing, along with questions about how much the bank might cut back, has resulted in volatility where daily, triple-digit moves have become almost routine.

The bond purchases, the third round of quantitative easing embarked on by the Fed in the wake of the 2008 financial collapse and subsequent recession, have kept interest rates and bond yields low. They have also helped keep a strong rally on most stock markets going for all this year.

Commodity prices were mixed with the July crude contract on the New York Mercantile Exchange ahead 18 cents to US$98.62.

July copper was a cent higher to US$3.16 a pound while August bullion rose $5.10 to US$1,372 an ounce.