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C$ slides to 2-year low as Fed eyes higher end-point for rates

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  • Canadian dollar weakens 0.3% contrary to the greenback
  • Touches its weakest since August 2020 at 1.3445
  • Price of U.S. oil settles 1.2% lower
  • Canadian bond yields ease over the curve

TORONTO, Sept 21 (Reuters) – The Canadian dollar slumped to a two-year low against its U.S. counterpart on Wednesday before paring its decline, as investors weighed the Federal Reserve’s plans to keep raising interest levels to tackle inflation.

The Canadian dollar was trading 0.3% lower at 1.34 to the greenback, or 74.63 U.S. cents, after touching its weakest since August 2020 at 1.3445.

“The Fed didn’t shock anyone by hiking rates 75 bps (basis points), but did prove more hawkish in forecasting an increased terminal rate than markets were anticipating,” said Royce Mendes, managing director and head of macro strategy at Desjardins.

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The U.S. dollar extended recent gains against a basket of major currencies because the Fed raised its target interest by three-quarters of a share point to a variety of 3.00% to 3.25%.

The central bank signaled more large increases ahead in new projections showing its policy rate rising to 4.40% by the finish of the year before topping out at 4.60% in 2023 to fight continued strong inflation. read more

The cost of oil , among Canada’s major exports, settled 1.2% lower at $82.94 a barrel because the Fed’s hawkish signal offset concerns of tighter coal and oil supply after an escalation of the war in Ukraine. read more

THE LENDER of Canada in addition has been fighting inflation. On Tuesday, Deputy Governor Paul Beaudry said that inflation in Canada remains “too much” but is headed in the proper direction, adding that the central bank can do whatever is required to bring price increases back again to target. read more

Canadian government bond yields were lower over the curve, tracking the move around in U.S. Treasuries. The 10-year touched its lowest since Aug. 30 at 3.027%, before recovering to 3.050%, down 5.7 basis points on your day.

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Reporting by Fergal Smith; Editing by Kirsten Donovan and Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.

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