Bank of Canada Crushes Loonie, Creates Mother of All Shorts

Jon Blogosphere, Economy, Energy, Fiscal Policies, Market Commentary

Clear winners: rich Chinese who buy homes in Canada.
The Canadian dollar swooned 1% against the US dollar on Friday, to US$0.7270, after having gotten hammered for the past six of seven trading days. It’s down 5% in December so far, 15.5% year-to-date, and 31% from its post-Financial Crisis peak of $1.06 in April 2011. It hit the lowest level since June 2004.
It got clobbered by the commodities rout, given their importance to the Canadian economy, the multi-year decline in the prices of metals, minerals, and natural gas, and then starting in mid-2014, the devastating plunge of the price of oil.
That the Fed has tapered QE out of existence last year and has been waffling and flip-flopping about rate hikes ever since made the until then beaten-down US dollar, at the time the most despised currency in the universe, less despicable – at the expense of the loonie.
Those factors would have been enough to knock down the loonie. But it wasn’t enough, not for the ambitious Bank of Canada Governor Stephen Poloz. The man’s got a plan.

This post was published at Wolf Street by Wolf Richter ‘ December 12, 2015.