The loonie, as the Canadian dollar is known, declined against its US counterpart on Thursday amid reinforced speculations that the Fed might taper its stimulus program further.
Having hit a session high at 1.0662 at 12:05 GMT, USD/CAD traded at 1.0630 at 13:52, adding 0.08% for the day. Support was likely to be received at December 31st low, 1.0617, while resistance was to be encountered at December 30th high, 1.0728. The pair touched 1.0737 on December 20th, the highest since May 2010. The Canadian dollar lost 6.6% against its US counterpart in 2013.
The greenback was supported after a report by the US Department of Labor revealed the number of people, who filed for unemployment benefits for the week ended December 28th, declined to 339 000 from upwardly revised 341 000 the previous week. Analysts projected that the jobless claims will increase to 342 000.
The US dollar remained supported after a report by the Conference Board on Tuesday revealed that the US consumer confidence increased to 78.1 in December from 72.0 in November. Analysts projected that the index will increase to 76.0 in December.
The US currency was also supported after Standard & Poor’s/Case-Shiller house price index rose by an annualized rate of 13.6% in October, compared to a year ago, the strongest increase since February 2006 and above analysts’ forecasts for an increase of 13%.
The reports reinforced speculations for further stimulus tapering by the Federal Reserve. The central bank starts reducing its bond purchasing program by $10 billion to $75 billion this month on improving US economy outlook.
According to the median estimate of economists surveyed by Bloomberg on December 19th, the Federal Reserve may reduce the purchases in $10 billion increments over the next seven meetings, before ending the program in December 2014.
Later in the day, the US is expected to release a report by the Institute of Supply Management on manufacturing activity, that may show the activity in the sector declined to 56.9 in December from 57.3 the previous month.
Meanwhile, BoC Governor Stephen Poloz said the Canadian economy growth will largely depend on increased exports, as domestic consumer spending slowed down.
“We have a U.S. growth story that looks fairly strong, as well as shifting Fed policy which is all supportive of the U.S. dollar, while the domestic side of Canada is pretty quiet”, said Camilla Sutton, head of currency strategy at Bank of Nova Scotia, cited by Bloomberg.
The discount between a barrel of Western Canada Select heavy oil compared to West Texas Intermediate, the U.S. benchmark, was $23, the same level as on December 23rd, the narrowest since August.
Elsewhere, having reached a session high at 1.6604 at 05:55 GMT, the pair’s highest since August 2011, GBP/USD traded at 1.6510 at 12:12 GMT, losing 0.29% for the day. Support was likely to be received at December 31st low, 1.6475, while resistance was to be met at 19th August 2011 high, 1.6618.
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