Canadian Dollar Falls Against Major Currencies Amid Fed Rate Hike
The Canadian dollar suffered a notable decline against major currencies in the week ending September 18. The USD/CAD pair surged to its highest level in a month, reaching 1.4005. This underperformance is significant as global central banks signaled diverging paths and commodity moves failed to rescue the loonie.
The Canadian dollar fell against all top-traded currencies, with the most notable move being versus the US dollar. The USD/CAD surged from 1.3918 to 1.4005, resulting in a 0.6% decline for CAD. Loonie weakness was also observed against the euro, yen, and Swiss franc, while it managed to hold ground against the Australian dollar.
The key drivers behind this decline were the Fed rate hike, oil's limited support, and Canadian inflation. The US Federal Reserve raised rates to 4.00% on September 16, intensifying the yield gap and making the greenback more attractive. Despite oil prices above $107, risk aversion and US dollar strength offset any commodity tailwind for CAD.