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Forex - USD/CAD slumps on speculation of further Fed stimulus

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Forexpros - The broadly weaker U.S. dollar was down against its Canadian counterpart on Monday, trading close to a two-day low as speculation that the U.S. economy may require further stimulus by the Federal Reserve weighed on the greenback.

USD/CAD hit 0.9828 during U.S. morning trade, the daily low; the pair subsequently consolidated at 0.9844, slumping 0.54%.

The pair was likely to find support at 0.9774, the low of August 17 and resistance at 0.9937, the high of August 18.

With no major economic data due Monday, markets were looking ahead to the Federal Reserve's annual policy retreat in Jackson Hole, Wyoming later in the week, at which Fed Chief Ben Bernanke could announce additional measures to support the U.S. economy.

In its most recent statement on monetary policy released on August 9, the Fed indicated that it "discussed a range of policy tools available to promote a strong economic outlook recovery" and said it was prepared to employ the tools "as appropriate".

The statement fuelled speculation the central bank may embark on a third round of quantitative easing, after the second round of bond purchases concluded at the end of June.

The loonie found further support after crude oil for delivery in October rose 1.8% to trade at USD84.23 a barrel on the New York Mercantile Exchange, after rising earlier to USD84.42 a barrel, the highest price since August 18.

Raw materials, including oil account for about half of Canada's export revenue.

Elsewhere, the Canadian dollar was also up against the euro, with EUR/CAD slipping 0.3% to hit 1.4205.

German Chancellor Angela Merkel said in an interview over the weekend that the introduction of euro bonds was "not the answer" to solve the region's debt crisis.

She added, "The markets want to force us into doing certain things and that we won't do. Politics cannot and will not simply follow the markets."

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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