Canadian dollar continues to slide

The Canadian dollar drifted lower Tuesday ahead of the U.S. Federal Reserve meeting Wednesday that could signal how much confidence the Fed has in the U.S. recovery.

The loonie was down 0.35 of a centto 89.64 US at the close of trading, a new four-year low. It fell as low as 89.47 in the morning.

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Markets have been severely buffetted over the last few sessions on concerns about emerging markets and plunging currencies in countries such as Turkey, Argentina and China.

But on Tuesday, stocks seemed to recover, buoyed by decisions in India and Argentina to raise interest rates.

The TSX/S&P index headed up105.37 points to 13,687.66, reversing a drop on Monday.

The Dow Jones Industrial Average gained 90.68 points to 15,928.56. The Standard-and-Poor's 500 index added 10.94 points to 1,792.50.

Waiting on Fed

The market is being influenced by anticipation that the Fed will announce another $10 billion reduction inits monthly bond purchases to $65 billion on Wednesday.

That would indicate the U.S. central bank has confidence in the U.S. economic recovery and could put further pressure on the loonie and other currencies.

For the past four years, the stimulus had the effect of lowering U.S. Treasury yields, encouraging investors to seek out higher returns in emerging economies like India and Brazil.

Now the money underpinning currencies in emerging markets is flowing out, heading for the greenback and forcing emerging market currencies lower.

The loonie is a victim of the same rush to the U.S. dollar.Some experts believe the Canadian dollar will fall as low as 85 cents before the slide stops.

The dollar has fallen throughout January and was last at par with the U.S. dollar in February 2013.

Wavering consumer confidence

A survey of Canadian consumer confidence by the Conference Board of Canada shows significant concern about their finances and the economic outlook for the country.

The share of respondents who think there will be more jobs in six months time is just 15.8 per cent, down from 20.3 per cent in January 2013.

Only 18 per cent of respondents who said they were financially better off today compared with six months ago but another 18 per cent said they were worse off.

More were optimistic about the future, with 26.6 per cent saying their finances would get better over the next six months.

Canadians are facing a federal budget Feb. 11, but there are unlikely to be any goodies to make life easier for the middle-class.

Federal budget ahead

Federal Minister of State for Finance Kevin Sorenson says the budget will focus on fiscal discipline with the idea of balancing the budget in 2015.

We will keep taxes down, we will continue to focus on skill training, we will use every measure to enforce labour mobility and see when young Canadians leave institution or university that they will have an employable skill, Sorenson said in an interview with CBCs The Lang & OLeary Exchange.

Sorenson said private sector economists see signs of recovery in the global economy and that should be good for Canada.

"There is a degree of optimism with the recovery that we see in the U.S. There is a degree of optimism, although slow growth in Europe, its more stable than a few months ago, he said.

The U.S. consumer confidence index rose last month, indicating Americans may be more willing to spend in 2014. However, there was mixed reaction on whether the employment situation in the U.S. would improve, with just 15 per cent expecting better opportunities over the next six months.