Canadian Dollar Soars on BoC Inflation Warning

The Canadian dollar has strengthened to its highest level in over a week against the US dollar, as the Bank of Canada's (BoC) warning about intensifying inflation risks bolsters the loonie.

After opening at C$1.3844 per US dollar, the currency rose by 0.20% to reach C$1.3817, according to live Investing.com data. This move extends a rebound from Tuesday's low of 1.3939 per US dollar, which was its weakest level since August 13.

The BoC held interest rates steady at 2.25%, but Governor Tiff Macklem emphasized the upside inflation risks, encouraging investors to increase bets that borrowing costs could eventually rise. Elevated energy prices and US tariffs on Canada have also been flagged as contributing factors to inflation.

Higher oil prices are providing additional support for the commodity-linked Canadian dollar. Meanwhile, markets are weighing the narrowing interest-rate gap between Canada and the US, as well as the prospect of easing trade tensions between Ottawa and Washington.