Canadian Dollar Weakens Amid Oil Price Drop and US Rate Hike Expectations
The Canadian dollar took a hit on Monday as oil prices retreated and expectations of further US rate hikes weighed on the currency. The loonie has been under pressure in recent weeks, with its value declining by around 0.17% against the US dollar.
The move is partly due to the widening gap between US and Canadian interest rates, which makes US assets more attractive to investors. Additionally, a pullback in crude prices has reduced one of the key sources of support for the commodity-linked Canadian currency.
According to Kyle Sonlin, President and Co-founder of Global Settlement Network, 'I think the key point with the Canadian dollar right now is that oil alone is not enough to tell you where the currency should trade.' He noted that higher crude prices would normally provide direct support to the loonie, but this effect is being offset by tariff uncertainty, concerns about Canadian growth, and a rate backdrop favoring the US dollar.
The Bank of Canada's data shows the official USD/CAD rate rising from 1.3784 on September 8 to 1.4002 on September 18, reflecting a broad weakening of the currency over this period.