CAD Weakness Continues as USD Strength Intensifies
The Canadian dollar (CAD) posted a notable weekly loss against major currencies in the week ending September 18. The CAD weakened against all top-traded currencies, with the most significant move being against the U.S. dollar.
USD/CAD surged from 1.3918 to 1.4005, with the CAD down 0.6%. Loonie weakness also showed up against the euro, yen, and Swiss franc, while it only held ground against the Australian dollar.
The underperformance of the Canadian dollar can be attributed to several key drivers. The U.S. Federal Reserve raised rates to 4.00% on September 16, intensifying the yield gap and making the greenback more attractive. Additionally, despite oil prices above $107, risk aversion and U.S. dollar strength offset any commodity tailwind for CAD.
The Canadian inflation rate stuck at 3%, above target, but not enough to trigger a Bank of Canada move, leaving CAD exposed. The loonie's biggest pain came from USD strength, with the Fed-driven movement putting pressure on the currency.