Canada’s loonie has been rallying hard since Monday to break the three-and a half year highs against the greenback, which it finally hit today as debt fears in the United States continued to knock down the U.S. Dollar.
USDCAD touched a low of 0.9405, the lowest since November 2007, as a speech by U.S. President Barack Obama on Monday gave no sign of a swift breakthrough in deadlocked talks to raise the U.S. debt ceiling.
“The political brinksmanship that’s being played out south of the border is clearly having an impact on the U.S. dollar,” said Jack Spitz, managing director of foreign exchange at National Bank Financial, noting talk of central banks’ reserves diversifying out of the U.S. dollar and into other currencies, such as Canada’s.
“Pretty well every currency is trading as a safe-haven currency when compared with the U.S. in terms of its current environment but that could change on a dime.”
The United States edged closer on Tuesday to a devastating default as Republicans and Democrats were deadlocked over competing plans to raise the debt ceiling, one week before a deadline to act.