Canadian Dollar Gains on Weak U.S. Jobs Data but Faces Oil Headwinds

The Canadian dollar saw a modest rise against the U.S. dollar on Monday, supported by weaker-than-expected U.S. jobs data. The report showed U.S. employers added just 29,000 jobs in September, significantly below forecasts, which eased pressure on the Federal Reserve to raise interest rates further. This provided some relief for the loonie, which had been under pressure from a widening yield gap between Canada and the U.S. and a decline in crude oil prices.

The Canadian dollar had ended its fourth straight week of losses, hitting an 18-month low of C$1.4263 earlier in the week. By Friday, it had recovered slightly to C$1.4257 per U.S. dollar. The weaker jobs data reduced the likelihood of near-term Fed rate hikes, which tempered some of the dollar's recent strength.

However, the Canadian currency remains sensitive to oil market developments. Brent crude dropped about 0.7% early Monday to near $101.59 a barrel, while U.S. crude fell about 1% to around $90.12. Increased Middle East exports and plans by G7 countries to release emergency oil stocks have raised expectations of higher supply, weighing on oil prices.

Interest-rate differentials also pose a challenge. Canada's two-year government bond yield was about 157 basis points below the U.S. yield at the end of last week, the widest gap since February 2025. This makes U.S. dollar assets relatively more attractive, adding to the loonie's vulnerabilities.