The Canadian dollar traded below parity with its US counterpart for the first time since August as the general negative sentiment on the Forex market added to fundamental concerns in Canada.

The Forex market experienced risk aversion as Hurricane Sandy threatens the United States. The commodity market was hurt by the negative mood as well and the Standard & Poor’s GSCI Index of raw materials fell 0.4 percent. The performance of the Canadian dollar is linked to the commodity market and it is not surprising that the loonie followed raw materials in decline.

Domestic fundamentals were also negative for the currency. Officials predicted that Canada’s budged will experience deficit in the next three years. Such outlook makes economist question whether the Bank of Canada will be able to perform interest rate hikes, which were expected after hawkish comments by the central bank.

USD/CAD rose from 1.0008 to 1.0010 as of 5:11 GMT today after it reached parity yesterday for the first time since August 7. EUR/CAD was flat at 1.2913, while CAD/JPY rose a little from 79.68 to 79.79.

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