Canadian Dollar Recovers as US Dollar Loses Momentum Amid Rising Bond Yields

The Canadian dollar (CAD) recovered from earlier losses on Monday as the US dollar (USD) eased from multi-month highs. This shift came amid growing market concerns over rising global debt yields, which led investors to move away from riskier assets.

USD/CAD was trading around 1.4240 during the US session, nearly unchanged after reaching a high of 1.4293 earlier in the day, the highest level since March 2025.

Global bond market turmoil drove currency fluctuations during the Asian and European sessions, pushing the USD higher alongside weakness in EUR/USD. The euro faced renewed pressure as rising borrowing costs in France sparked fears of a potential crisis spreading to other European Union countries, echoing the 2009 credit crisis.

These developments overshadowed the impact of Friday’s weaker-than-expected US nonfarm payrolls report, which reduced the likelihood of another Federal Reserve interest rate hike following its October 27-28 meeting.

In Canada, investors are awaiting key economic data, including Tuesday’s Ivey Purchasing Managers’ Index and Friday’s employment report. However, the CAD has lost over 3% in the past month due to diverging monetary policies between the Federal Reserve and the Bank of Canada (BoC). The BoC has kept its benchmark interest rate unchanged at 2.25% for a year and is unlikely to raise it soon.

The BoC’s cautious stance is driven by persistent inflation above its 2% target, a weak labor market, and economic uncertainty from trade tensions with the United States.