TORONTO: The Canadian dollar touched a fresh seven-month low against its US counterpart on Wednesday as the greenback got a lift from minutes from last month's Federal Reserve meeting that showed some support for scaling back the Fed's bond-buying program.
Also undercutting the loonie, as Canada's currency is colloquially known, were figures that showed home prices fell for a fifth straight month in January, the latest in a string of dismal data points for the Canadian economy.
"The domestic data is starting to take a toll on the Canadian dollar...and with all other things being equal, the pair wants to drift higher," said Adam Button, a currency analyst at ForexLive in Montreal.
Hints the Fed could pare back its asset purchases should help the greenback and hurt the loonie, which has recently benefited from a comparatively hawkish Bank of Canada tone.
But the Canadian dollar tracked the greenback's gain against other major currencies after the Fed minutes were released as investors saw the statement as a broad endorsement of US economic recovery that would likely also boost Canada, which counts the United States as its largest trading partner by far.
"The interpretation of the minutes is it's more likely the Fed will cut QE (quantitative easing) later this year, and they will do that only if the economy improves, so really it's an endorsement of the economy," Button said.
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