Canadian Dollar Rebounds After Multi-Month Low
The Canadian Dollar (CAD) rebounded on Monday, snapping a multi-month low as the USD/CAD pair retreated from its highest level since April 2025. The shift came as the US Dollar struggled to maintain its rally amid mixed US business activity data. The pair, which had climbed to 1.4293 earlier in the day, eased back to around 1.4250.
The US Dollar Index (DXY) touched a fresh year-to-date high of 102.53 before pulling back slightly to 102.20. Support for the Greenback came from elevated US Treasury yields and concerns over fiscal positions, despite expectations of a Fed rate hike later this year. The 10-year US Treasury yield held near 5.32%, close to last week’s peak.
On the Canadian side, the Loonie’s strength appeared driven by technical buying and profit-taking rather than fundamental improvements. The yield gap favors the US Dollar, with the Canadian 10-year bond yield at 3.99% compared to the US yield of 5.32%. Analysts at Brown Brothers Harriman warn that market pricing for a Bank of Canada (BOC) rate hike may be too aggressive, leaving the CAD vulnerable if expectations are scaled back.
Friday’s labor market report will be closely watched, with analysts predicting only 5,000 new jobs in September after August’s loss of 41,700. The unemployment rate is expected to rise to 6.5%, signaling weak labor demand. Core inflation near the BOC’s 2% target suggests limited justification for aggressive tightening, potentially weakening the CAD further.