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Loonie Losing Ground After No-Confidence Vote

Friday, 25 Mar 2011 | 5:03 PM ET
Canadian flag
Terry J Alcorn | iStock Exclusive | Getty Images
Canadian flag

The Canadian dollar is weaker after a no-confidence vote toppled the conservative Harper government.

The loonie had been enjoying a nice rise, thanks to Canada's status as a major oil exporter and traders' anticipation of possible interest rate hikes. But earlier today, a Federal Reserve official reiterated his hawkish views that moved the U.S. dollar higher, and then the no-confidence motion put further pressure on the Canadian currency.

What happens next? Analysts expect Harper to ask on Saturday that Parliament be dissolved, and elections will likely take place in early May. As for the loonie, well, uncertainty is never a great thing for a currency, but Camilla Sutton, FX strategist at Scotia Capital, is bullish.

"Political uncertainty in Canada (with a May election looming) should not faze global investors and certainly shouldn't trump Canada's strong sovereign position, the exposure to oil prices and a relatively solid fundamental base," she told me.

Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm.

"Money in Motion Currency Trading" repeats on Saturdays at 7pm.

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