The Canadian dollar posted a notable weekly loss against major currencies for the week ending September 18, with USD/CAD jumping to a one-month high. A Fed rate hike drove the move, and even Brent crude above $107 failed to give the loonie support.
USD/CAD surged from 1.3918 to 1.4005 this week, its highest level in a month, as the Canadian dollar fell 0.6% against the greenback. The loonie lost ground against nearly every major currency in the basket, holding steady only against the Australian dollar.
Fed hike widens the yield gap
The U.S. Federal Reserve delivered a rate hike on September 16, raising rates to 4.00%, intensifying the yield gap between the two currencies and making the dollar more attractive to traders.
The Canadian dollar also weakened against the euro, yen and Swiss franc over the same stretch. However, its slide against the yen reflects yen weakness more than loonie strength, since CAD/JPY rose 1.6% week over week.
Oil strength fails to rescue the loonie
Brent crude traded above $107 during the week, a level that would typically lend the commodity-linked loonie some support. But risk aversion and U.S. dollar strength offset any commodity tailwind for CAD, leaving the currency without its usual cushion.
Canadian inflation added to the pressure. August's reading held at 3%, above target, but it wasn't strong enough to push the Bank of Canada toward action, leaving the currency exposed to global flows.
Elsewhere in the basket, EUR/CAD held roughly flat at 1.6068. GBP/CAD edged up 0.25% to 1.8708, showing the loonie's weakness was concentrated against the U.S. dollar rather than broad-based. CAD/CHF stayed essentially flat at 0.5891. The loonie only held its ground against the Australian dollar, where AUD/CAD moved -0.34% to 0.9979.
Source: Investing.com
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