Canadian dollar closer to two-year lows versus US peer

USD/CAD pair went above 1.05 and was on its way to reach the lowest value for almost 2 years on expectations that US dollar will gain more strength when the Federal Reserve exits its Quantitative Easing.

The currency lost ground against the majority of its 16 most-traded peers as Fed Chairman Ben Bernanke said on June 19th, that policymakers may embark on reducing their 85-billion USD of monthly asset purchases by the end of this year if US economy accomplishes the central bank’s objectives. “Given the underlying price action and the sentiment out there in the market there’s still potential for Canada to continue to weaken off here and the dollar in general to strengthen”, said Matthew Perrier, director of foreign exchange at Bank of Montreal, by phone from Toronto, cited by Bloomberg.

USD/CAD pair added 0.9% to reach 1.0547 during early US trade, which was the lowest point since October 5th 2011.

Canadian currency touched a technical level that proposed it might soon gain strength. The 14-day relative strength index (RSI) versus the US dollar fell to 29.92%, less than the 30% level seen by some traders as a sign an asset has weakened too quickly.

“There’s no technical levels left any more, they’re all gone. U.S yields is the number one story that’s driving global equities low, it’s driving global commodities lower, and it’s got people kind of panicking out of emerging market currencies, and secondarily, out of the commodity currencies.”, said Greg Anderson, head of global foreign exchange strategy at Bank of Montreal, cited by Bloomberg.