The loonie slides as investors flee to the US dollar

(Toronto) The Canadian dollar fell again, hitting lows not seen in more than two years the day after the US Federal Reserve announced another rate hike.

Posted at 3:09pm

The loonie slipped below 75 cents earlier this week and fell even lower after the Fed hiked interest rates by three-quarters of a percentage point on Wednesday.

Rahim Madhavji, chairman of Knightsbridge Foreign Exchange, says the Canadian dollar is facing a trio of interrelated stresses, including rising US interest rates, falling stock markets and a widespread flight away from the US dollar to safety.

According to Mr. Madhavji, the loonie is closely linked to the prospects for economic growth and the development of stock markets. So, as markets fell, so did the currency.

Madhavji believes that persistent inflation in the United States is likely to herald more interest rate hikes and more pressure on the markets, which should also mean more trouble for the lunatics in the coming months.

However, the Canadian dollar is doing better than most other currencies. The National Bank noted earlier this month that it had been the best-performing currency against the US dollar among the top 10 currencies this year.

Tyrone Hodgson

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