Canadian Dollar Touches Two-Week Low on Budget Impasse
The Canadian dollar touched a two- week low against its U.S. counterpart as House Republican leaders scrapped a plan to allow higher taxes, throwing budget talks into turmoil.
The Canadian currency extended the decline after the nation’s economic expansion in October matched the median forecast in a Bloomberg survey. House Speaker John Boehner’s plan to allow tax-rates to rise on people with annual incomes over $1 million failed to garner votes from his own party, causing Boehner to withdraw the proposal.
“Equities had rallied on the back of markets anticipating a resolution, and I think given what’s happened overnight that’s looking further away,” said David Bradley, director of foreign- exchange trading in Toronto at Scotia Capital Inc., a unit of Scotiabank. “There was a lot of good news priced in over the last few weeks.”
The loonie, as the Canadian currency is known for the image of the waterfowl on the C$1 coin, fell 0.4 percent to 99.20 cents per U.S. dollar at 8:34 a.m. in Toronto. Earlier it had touched 99.21 cents, the weakest level since Dec. 7. One loonie buys $1.0081.
Futures of crude oil, Canada’s largest export, fell 1.2 percent to $89.09 a barrel. The MSCI World Index of stocks declined 0.3 percent.
Higher tax rates on the wealthy have been a key demand of President Barack Obama in reaching a budget deal to avoid $600 billion in mandatory tax increases and spending cuts which could plunge the U.S. into recession if they take effect in January. Obama had promised to veto the proposal for not raising enough new tax revenue.
Gross domestic product grew 0.1 percent to an annualized C$1.29 trillion ($1.30 trillion) after stalling in September and shrinking 0.1 percent in August, Statistics Canada said today in Ottawa. The increase matched the median forecast in a Bloomberg economist survey with 23 responses.
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