Canadian dollar heads lower ahead of Fed speech on quantitative easing

TORONTO – The Canadian dollar was lower Wednesday, as investors awaited an announcement by the U.S. Federal Reserve on how it plans to begin curtailing its $85-billion-a-month bond-buyback program.

The loonie was down 0.10 of a cent to 97.03 cents US.

Since 2008, the central bank has been purchasing the Treasurys and mortgage bonds in efforts to stimulate the economy by keeping long-term loan rates low.

The move has made borrowing money easier, and in turn, helped boost stock markets around the world.

For the past few months, Fed chairman Ben Bernanke has warned that the stimulus will eventually run out on signs that the economy is faring well again.

The Fed has been in a policy meeting for the past two days, and it is highly anticipated that Bernanke will announce at its conclusion that tapering of the asset purchases will begin immediately.

Most economists expect the Fed to pull back gradually, and anticipate the first move will be somewhere between US$10 billion or US$15 billion.

In economic news, a rosy picture has emerged on housing starts in the U.S. The Commerce Department reported that U.S. builders started work in August on the most single-family homes in six months and requested permits to build even more in future months. The figures suggest housing remains are driver of economic growth despite higher mortgage rates.

Builders increased construction of single-family homes seven per cent to a seasonally adjusted annual rate of 628,000. That was the most since February. And they sought 627,000 permits for them, a 3 per cent increase from July and the most since May 2008.

Meanwhile, commodities were mixed as December bullion climbed $6.30 to US$1,303.10 an ounce, while December copper was up five cents at US$3.27 a pound. The October crude contract climbed 54 cents US$105.96 a barrel.