Canadian Dollar Surges to Two-Month High Amid Falling Bond Yields

The Canadian dollar has strengthened to a two-month high against the US dollar due to declining bond yields and reduced expectations for a Federal Reserve interest rate hike next month. The value of Canadian building permits jumped 18.5% in June, driven mainly by non-residential construction. This increase suggests that the Canadian economy is recovering from a slow start to the year.

Canadian government bond yields fell across maturities on Wednesday, with the 10-year yield dropping 2.3 basis points to 3.685%. The two-year yield also rose, by around 16 basis points over the same period. Robert Both, senior macro strategist for Canada at TD Securities, noted that comparing economic data performance over the past six weeks explains why Canada has outperformed the US at the short end of the yield curve.

The Canadian dollar weakened 0.1% to C$1.3940 per US dollar after touching C$1.3909 during the session. This is its strongest level since June 10. Oil prices, one of Canada's major exports, slipped around 0.1% to $83.11 a barrel due to forecasters lowering their outlooks for global oil demand in 2026.