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These are stories Report on Business is following Thursday, March 19, 2015.

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The morning after
Reality returned to financial markets today after yesterday's post-Fed "meltdown" of the U.S. dollar.

The greenback plunged yesterday, sending other currencies sharply higher, as the Federal Reserve removed the word "patient" from its policy statement, but nonetheless indicated a slower path for interest rate hikes.

But, as one observer put it, "people have come to their senses" today.

Here's what happened: Until yesterday, the U.S. central bank had said it would be "patient" in hiking interest rates. Chair Janet Yellen and her colleagues changed that yesterday, meaning the first rate hike could come as early as June, but at the same time indicated a slow pace going forward. Not only that, it warned that export gains are slowing.

"This is a classic good-cop-bad-cop situation," said deputy chief economist Michael Gregory of BMO Nesbitt Burns.

After yesterday's rush, however, today there was a "significant rebound across the board," said senior currency strategist Greg Moore of RBC Dominion Securities.

"The main takeaway from the Fed was that the profile for rate hikes could be slower," Mr. Moore added.

"Taking a step back, though, that doesn't change the divergence theme significantly, including against the BoC that is still contemplating another rate cut. So broadly speaking, yesterday's message from the Fed does not change our view that USD/CAD should trend higher."

What he means by that is that the U.S. central bank and the Bank of Canada are still on different paths, which should again push the U.S. dollar higher against the loonie.

Yesterday was truly wild.

The Canadian dollar shot from a low of 77.93 cents U.S. to a short-lived high of 80.32 cents.

The Fed was "showing sensitivity" to the potential reaction to its decision, said analyst Jasper Lawler of CMC Markets.

The loonie gave back today, as did other currencies.

"My first reaction today, is to count to three slowly and then buy dollars," said Kit Juckes, the chief of foreign exchange at Société Générale.

He meant the U.S. dollar, obviously, not the loonie.

The Canadian dollar rose as high as 79.94 cents today, and sank as low as 78.38 cents, sitting at 78.53 cents by late afternoon.

"Janet Yellen removed the word 'patience' from the statement and in doing so cast doubt over the likelihood of a rate rise in June," said market analyst David Madden of IG in London.

"It isn't the first time a central banker has given with one hand and taken with the other," he added.

The Swiss National Bank and Norges Bank, by the way, both held steady today.

Potash stock slides
Shares of Potash Corp. of Saskatchewan sank today after the company's warning that new provincial tax measures will cut its profit by up to $100-million this year.

Chief executive officer Jochen Tilk slammed the Saskatchewan government in the wake of yesterday's provincial budget and announcement of a review of how producers are taxed.

"While we understand the difficult revenue satiation facing the government, we are nearing completion of a $6-billion investment in Saskatchewan which was based on the existing tax structure remaining in place," he said.

"Changing the rules midstream impacts the ability of our shareholders to earn a fair return on their capital and undermines Saskatchewan's relative competitiveness."

Tax changes, the company warned, are expected to cut its pretax profit by between $75-million and $100-million this year.

At the heart of it, Potash said in a statement, is the "significant change" in the timing of allowable deductions for expansion and maintenance spending that will now spread over a longer timeline.

The Saskatchewan government, which also unveiled a review of the tax system, should aim for a "constructive and consultative" process, Potash added.

Saskatchewan is one of the Canadian provinces being hit by the collapse in oil prices, though to a far lesser extent than Alberta.

It still projects a small surplus this year.

"The less-favourable (i.e. more stretched out) deduction period is expected to boost provincial revenues by $150-million in fiscal year 2015-16," senior economist Robert Kavcic of BMO Nesbitt Burns said of the potash tax changes.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/03/24 6:40pm EDT.

SymbolName% changeLast
CADUSD-FX
Canadian Dollar/U.S. Dollar
-0.22%0.73545
TGT-N
Target Corp
+1.18%174.67

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