The Canadian dollar has witnessed a sharp decline against the US dollar following the US Federal Reserve's decision to cut the interest rate by 0.25%, bringing it to a range of 4.25%-4.5%.

Reasons for the decline:

• Fed's accommodative policy: The decision to lower the interest rate boosted demand for the US dollar due to expectations of improved liquidity in US markets.

• Increased strength of the US dollar: With US inflation remaining relatively high and the labor market improving, confidence in the US economy has increased, supporting the currency.

• Impact on the Canadian dollar: Commodity-linked currencies, such as the Canadian dollar, are significantly affected by fluctuations in the US dollar and interest rates.

Implications of the decline:

• Increased pressures on the Canadian economy: The weakness of the Canadian dollar may lead to higher import costs, exacerbating inflation rates.

• Negative effects on consumers: Rising prices may harm the purchasing power of Canadian citizens.

This decline highlights the extent of the US Federal Reserve's impact on global markets and currencies linked to major economies, such as the Canadian economy.