Canadian Dollar Shows Unexpected Strength

The Canadian dollar was surprisingly strong as it was rising yesterday and continued to rally today even as the Federal Reserve tapering announcement made riskier currencies less attractive to Forex traders.

As most other currencies, the loonie dropped against the US dollar on the day when the Fed decided to trim its stimulus program. Some analysts argue that the current rally is nothing more than a short-term correction after the big move in one direction. Yet the Canadian currency demonstrated strong upward momentum against other currencies too, even the Japanese yen, which was rather strong ahead of the Bank of Japan monetary policy meeting.

Inflation and retail sales reports will be released from Canada tomorrow. They are expected to show small increase, suggesting that economic growth persists in the North American country, but remains very weak.

USD/CAD traded at 1.0662 as of 1:38 GMT today after falling from 1.0700 to 1.0663 yesterday. EUR/CAD went down from 1.4565 to 1.4549 and CAD/JPY ticked higher from 97.72 to 97.80, trading near the highest level since May 31.

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