Loonie lower, traders look to Fed meeting, latest reading on economic growth

TORONTO – The Canadian dollar closed lower Tuesday as traders awaited the end of a two-day Federal Reserve meeting and the latest Canadian growth figures later this week.

The currency dipped 0.23 of a cent to 95.51 cents US following a rise of almost a tenth of a cent Monday.

The loonie tumbled 1.5 cents last week after the Bank of Canada changed its bias from tightening to neutral while forecasting lower than expected economic growth through 2015.

Central banks continue to be in focus as traders also looked to the end of a two-day interest rate meeting of the U.S. Federal Reserve that ends Wednesday. They are particularly interested in the Fed’s wrap-up announcement for any hints as to when the central bank might start to move on cutting back on key stimulus involving the monthly purchase of US$85 billion of bonds.

Markets had previously expected the withdrawal of the Fed’s stimulus to begin this year but expectations have shifted to next year as the pace of improvement in the U.S. economy faded. Also, economists are still trying to gauge the cost of the political wrangling earlier this month that resulted in a partial shutdown of the U.S. government.

The major piece of Canadian economic data comes out on Thursday. Statistics Canada is expected to report that gross domestic product grew by a respectable 0.2 per cent during August.

Commodities were mixed with the December crude contract on the New York Mercantile Exchange down 48 cents to US$98.20 a barrel.

December bullion declined $6.70 to US$1,345.50 an ounce while December copper rose a penny to US$3.28 a pound.