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Loonie gains ahead of Fed decision

Canadian Press, The Canadian Press
0 Comments| June 18, 2014


TORONTO - The loonie was barely changed Wednesday morning, as traders awaited the latest policy decision by the U.S. Federal Reserve.

The Canadian dollar was ahead by 0.02 of a cent to 92.07 cents US.

Traders have been cautious this week as the central bank of the world's largest economy met for a two-day meeting that's expected to produce an update on how it thinks the U.S. is faring.

The Fed is expected to make its rate announcement at 2 p.m. ET, followed by a press conference by chairwoman Janet Yellen — her second since taking over the bank in February.

It's anticipated that the U.S. central bank will continue with its steady clawback of quantitative easing, and cut the monthly bond buyback program by US$10 billion to US$35 billion on signs of a slowly recovering economy. The stimulus has helped keep borrowing rates low, and sent equity markets upwards.

The markets will also be carefully watching Yellen's comments for any hints on when the Fed will begin raising interest rates , as it comes closer to its target of a two per cent rate for inflation. Data released on Tuesday showed that the consumer price index rose 0.4 per cent in May and was up 2.1 per cent over the past 12 months. Despite the surprising figures, most economists still don't think the central bank will be quick to raise rates for at least a year.

Earlier this week, the International Monetary Fund revised its growth forecast for the U.S. The IMF now says it thinks the economy will grow at a modest two per cent this year, down from its earlier prediction of 2.7 per cent.

Meanwhile, commodities rose amid more developments from Iraq.

Iraqi security forces battled with insurgents targeting the country's main oil refinery and claimed to regain partial control of a city near the Syrian border, trying to blunt the offensive by militants who diplomats fear may have abducted some 100 foreign workers.

The Beiji refinery accounts for a little more than a quarter of the country's entire refining capacity — all of which goes toward domestic consumption for things like gasoline, cooking oil and fuel for power stations. Any lengthy outage at Beiji risks long lines at the gas pump and electricity shortages, adding to the chaos already facing Iraq.

The July crude contract added 23 cents to US$106.59 a barrel. August gold bullion gained 40 cents to US$1,272.40 an ounce, while July copper was unchanged at US$3.06 a pound.

Follow @LindaNguyenTO on Twitter.



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