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Loonie Declines as Economy Contracts

July 29, 2011 at 17:06 by Andriy Moraru

Canadian DollarThe Canadian dollar fell sharply against all of its major counterparts today, following the unexpected negative GDP report.

The loonie dropped to its July 19 level against the US dollar, the lowest value against the euro since July 8 and slid to March 18 rates against the Japanese yen today. The currency also decreased against the outsider of the day — the Australian dollar.

It’s quite clear that today’s bearish behavior is largely a result of Canadian GDP report that was released by Statistics Canada at 12:30 GMT. It showed a contraction of 0.3 percent in May 2011, which followed a zero change in April this year. The market economists forecasted the May value to be at 0.1 percent, positive.

The analysts also cite the poor US GDP growth as another factor that badly influenced the Canadian dollar (as the Canada’s economy is quite dependent on the one of the United States). Some of them also believe that June figures will be far from good too.

USD/CAD rose from 0.9489 to 0.9562 as of 17:03 GMT today. EUR/CAD went up from 1.3596 to 1.3748, while CAD/JPY dropped from 81.85 to 80.69, reaching low as 80.40 today.

If you have any questions, comments, or opinions regarding the Canadian Dollar, feel free to post them using the commentary form below.

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