Canadian dollar slips as investors turn to the US dollar

(Toronto) The Canadian dollar fell again, hitting its lowest level in more than two years, the day after the US Federal Reserve announced a new interest rate hike.

Posted at 3:09pm.

The Canadian dollar fell below 75 cents in the United States earlier this week, even after the Federal Reserve raised its benchmark interest rate by three-quarters of a percentage point on Wednesday.

Rahim Madhavji, chairman of Knightsbridge Foreign Exchange, says the Canadian dollar faces three intertwined pressures, including rising US interest rates, falling stock markets and a large-scale flight to safety from the US dollar.

According to Mr. Madhavji, the Canadian dollar is closely related to the outlook for economic growth and the development of stock markets. So, as the markets slumped, so too did the currency.

Madhavji believes that persistent inflation in the US is likely to portend further interest rate hikes and further pressure on the markets, which should also translate into more difficulties for the Canadian dollar in the coming months.

However, the Canadian dollar is doing better than most other currencies. The National Bank noted earlier this month that it was the best performing among the ten major currencies against the US dollar this year.

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