The Canadian dollar is down 0.9% against the greenback
It is its weakest point since March 2020 at 1.4444
CAD’s three-month implied volatility rises to 6.6
Canadian bond yields are rising across the curve
(Updating prices and activity details)
TORONTO, Dec 18 (Reuters) – The Canadian dollar fell to a nearly five-year low against its U.S. counterpart on Wednesday as aggressive Federal Reserve guidance boosted the greenback and investors sought protection from additional losses for the Canadian coin.
The loonie was trading 0.9% lower at 1.4440 against the US dollar, or 69.25 US cents, after hitting its weakest intraday level since the start of the COVID-19 crisis in March 2020 at 1.4444 reaches.
The US dollar jumped against a basket of major currencies after the Fed delivered a widely expected rate cut, while also signaling it would slow the pace of the monetary policy easing cycle.
“We knew it was going to be an aggressive cut today. It’s very hawkish,” said Erik Bregar, director of FX & precious metals risk management at Silver Gold Bull.
“Nobody doesn’t like it. Stocks don’t like it, bonds don’t like it, precious metals don’t like it, the risk-sensitive Canadian dollar doesn’t like it. The only thing going up is the U.S. dollar.”
Domestic political uncertainty has weighed on the Canadian currency in recent days, along with the threat of US trade tariffs and the Bank of Canada’s aggressive rate-cutting campaign as headwinds for the currency.
“Demand for downside protection in the loonie has soared,” said Karl Schamotta, chief market strategist at Corpay.
Implied volatility on an at-the-money options contract to buy or sell Canadian dollars against the U.S. dollar in three months rose to about 6.6, the highest level since April 2023. In July it was 4.5.
Investors and companies use options to hedge their currency exposure. The currency hit a low of 1.4667 in March 2020.
Canadian bond yields rose across the curve, tracking the moves in U.S. government bonds. The 10-year yield rose by 8.2 basis points to 3.224%. (Reporting by Fergal Smith; Editing by Chizu Nomiyama and Jonathan Oatis)