Sep 13, 2012 / 2:32 pm
The Canadian dollar shot up almost a full US cent to a 13-month high Thursday as the U.S. currency weakened after the U.S. Federal Reserve launched another round of economic stimulus.
The loonie jumped 0.87 of a cent to 103.27 cents US after the U.S. Federal Reserve said it will spend $40 billion a month on a new round of bond purchases to boost the weak economy, and has not set an end date.
The money will be spent on mortgage backed securities to keep interest rates low, encourage lending and support the slow recovery of the housing sector.
The loonie has surged in value against the U.S. dollar since last week, up 2.35 cents since last Wednesday's close, after European Central Bank president Mario Draghi announced the ECB would buy government bonds to hold borrowing costs down the most vulnerable eurozone members. And the greenback further weakened over the last week as speculation grew the Fed was prepared to launch a third round of stimulus, particularly after August job creation figures disappointed even modest expectations.
The U.S. central bank will also continue to buy bonds with long maturity horizons under its so-called Twist program, leaving them buying a total of US$85 billion per month for the balance of the year under the two programs.
The Fed also says it will keep buying more bonds until the job market shows substantial improvement.
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