The Canadian dollar weakened on Monday as falling oil prices and expectations of further U.S. monetary tightening kept USD/CAD near its weakest level since early August. The pair traded around 1.4007, up 0.17%, after Bank of Canada data showed the currency sliding steadily over the past two weeks. A widening interest rate gap between the U.S. and Canada has become an increasingly important driver of the move.
Loonie holds near its weakest level since early August
USD/CAD traded around 1.4007, up 0.17%, at 12:17 a.m. ET, holding near the levels reached after the loonie touched its weakest point since Aug. 7 last week. The pair had already broken above the psychologically important 1.40 level in that move, and Monday's session kept it close to those lows.
Bank of Canada data show the official USD/CAD rate climbing from 1.3784 on Sept. 8 to 1.4002 on Sept. 18, reflecting a broad weakening of the currency over the period. Kyle Sonlin, President and Co-founder of Global Settlement Network, said "Higher crude would normally provide fairly direct support to the Loonie", but that support is running up against tariff uncertainty and concerns about Canadian growth.
Oil retreat and Fed outlook compound the pressure
Brent crude fell about 2% on Monday as markets focused on signs that Saudi oil flows could recover and on diplomatic efforts around the Middle East conflict. Lower crude prices weigh on the Canadian dollar because of Canada's large energy-export exposure.
At the same time, the U.S. dollar stayed supported by expectations that the Federal Reserve may tighten policy further after its latest rate hike. Chicago Fed President Austan Goolsbee said persistent inflation linked to strong demand could require higher rates, reinforcing the prospect of a prolonged period of restrictive U.S. monetary policy.
The Bank of Canada, by contrast, has held its policy rate at 2.25%, leaving a substantial gap with U.S. rates.
Source: Investing.com
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