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US shutdown hurts Canadian dollar

The US shutdown has led to the US dollar weakening against many currencies, but it has had an even more pronounced effect on the Canadian dollar.

All trading involves risk. Losses can exceed deposits.

The US government today commenced its first partial shutdown in almost 17 years. There is a great deal of uncertainty over how much of an impact it will have on the US economy’s growth, but it is likely to be proportional to the duration of the shutdown.

What is almost certain is that having hundreds of thousands of workers furloughed will hinder the economy in some way; the magnitude has yet to be determined. The outlook for the US economy also is clouded by the looming debt-ceiling debate.

The US dollar has fallen broadly, with the dollar index dropping 0.1%, but the impact on the Canadian dollar has been even more injurious. The Loonie has today weakened against the majority of currencies against which it is commonly traded, being one of the few currencies to lose ground against the US dollar.

The US is Canada’s biggest trading partner and any threat to the US economy is a threat to Canadian exports.

The Canadian dollar fell sharply against fellow commodity-currency the Australian dollar. AUD/CAD climbed 0.96%, after the Australian Reserve Bank decided to leave its benchmark rate unchanged.

The loonie’s fall comes in spite of a bigger-than-expected rise in Canadian GDP in July, which was announced yesterday. The 0.6% increase was the biggest monthly expansion in two years.

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