Loonie Takes Hit as Fed Rate Hike Boosts Greenback
The Canadian dollar slipped against its US counterpart on Thursday due to a more hawkish monetary policy outlook from the Federal Reserve. The Fed's decision to raise interest rates and signal further tightening weighed heavily on the loonie, which had been trading near the psychologically important C$1.40-per-U.S.-dollar threshold.
The widening interest-rate differential between the US and Canada provided significant support to the greenback, while also putting downward pressure on the Canadian currency. The Bank of Canada has kept its policy rate unchanged at 2.25%, citing elevated inflation risks against weaker economic conditions.
Weaker oil prices also contributed to the loonie's decline, as crude fell sharply in the previous session due to expectations of greater supply. The commodity-linked currency is heavily influenced by fluctuations in oil prices.