The clash in Washington and the Federal Reserve’s decision to prolong stimulus that initially pushed down the U.S. dollar is “giving people opportunities to buy U.S. dollars more cheaply,” Darcy Browne, managing director of currencies at Canadian Imperial Bank of Commerce’s CIBC World Markets unit, said by phone from Toronto. “People are happy it’s happening.”
The U.S. Congress has yet to pass a U.S. budget as Republicans and Democrats tussle over whether to stop funding the 2010 health-care overhaul known as Obamacare, threatening a a government shutdown by Oct. 1.
Canada’s dollar rose to a three-month high on Sept. 18 after the Fed’s surprise decision to refrain from reducing the $85 billion of monthly bond purchases it uses to cap borrowing costs. Twenty-four of 41 economists surveyed by Bloomberg on Sept. 18-19 said the Fed won’t take the first step in slowing its bond purchases until December.
“With the focus still on Washington, that can leave growth currencies such as the loonie vulnerable,” Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co., said in a phone interview. “As long as that risk continues to hang over us growth currencies in general would tend to favor their back foot.”
The loonie is little changed over the past month against nine developed nation currencies tracked by the Bloomberg Correlation-Weighted Index. The Australian dollar has climbed 1.9% while the New Zealand dollar has had the biggest increase at 4%. The U.S. dollar has dropped 1.9%.