The Canadian dollar fell sharply on Wednesday in advance of a highly anticipated decision by the U.S. Federal Reserve regarding interest rates due in the afternoon.
The loonie was down 0.47 of a cent at 72.32 cents U.S. The Fed is widely expected to raise interest rates this afternoon, widening the gap in monetary policy between Canada and the United States.
“We could see considerable volatility” in the movement of the loonie before and after the 2 p.m. ET announcement from the Fed, Rahim Madhavji, foreign exchange strategist at Knightsbridge in Toronto, said.
WATCH: Markets brace for first U.S. interest rate hike in almost a decade.
MORE: Latest coverage — the plunging loonie
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Oil’s influence
On the commodity markets, the January crude contract was down 51 cents at US$36.84 per barrel.
“While today’s [Fed] decision will be the most important event of the day, the Canadian dollar has traded in tandem with oil prices for the last few sessions,” Madhavji said. “So [oil prices] will be an important factor for the Canadian dollar moving forward.”
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