Canadian Dollar Dips to 18-Month Low Amid Euro Weakness and Oil Decline

The Canadian dollar dropped to its lowest level in 18 months on Monday, falling 0.1% to 1.4257 per US dollar, or 70.14 US cents, after hitting an intraday low of 1.4293. This decline was primarily driven by broader gains in the US dollar, influenced by concerns about France’s budget deficit rather than domestic factors in Canada.

George Davis, chief technical strategist at RBC Capital Markets, noted that the Canadian dollar’s movement was more impacted by developments in Europe than by domestic conditions. The US dollar strengthened against a basket of major currencies as worries about France’s budget deficit weighed on the euro.

Canada’s services sector continued to contract in September, marking the fourth consecutive month of decline, according to S&P Global’s Canada services PMI data. The Business Activity Index rose to 48.3 from 46.8 in August but remained below the 50 no-change mark, indicating ongoing economic uncertainty fueled by tariffs and the war in the Middle East.

The price of oil, a key Canadian export, fell due to increased crude exports from the Middle East and a pledge by the Group of Seven nations to boost supplies. US crude oil futures settled 1.8% lower at $89.43 a barrel. Additionally, speculators increased their bearish bets on the Canadian dollar, with non-commercial net short positions rising to 78,671 contracts as of September 29, up from 53,210 the prior week.

Canadian bond yields rose across a steeper curve, with the 10-year yield up 4.4 basis points at 3.989%, nearing the nearly three-year high of 4.042% touched last Thursday. Meanwhile, Quebec headed to the polls on Monday, with a separatist party expected to win, though the campaign focused more on US President Donald Trump than on independence.