Loonie Edges Up Ahead of Fed Rate Decision, Analysts Cautious About Market Expectations

The Canadian dollar saw a modest increase on Tuesday as markets waited for the Federal Reserve's interest rate decision, set to take place later this week.

At one point, the currency touched its lowest value since July 14 at 1.4128 per U.S. dollar, but it ultimately traded 0.2% higher at 1.41 per U.S. dollar, or 70.92 U.S. cents.

Market expectations for a Fed rate increase may be overstated, according to analysts, who point to cooler inflation data and reduced tensions between the U.S. and Iran as indicators that the central bank faces a higher threshold for raising rates than current rate futures markets reflect.

The Bank of Canada is scheduled to release minutes from its most recent policy meeting on Wednesday, with the central bank maintaining its benchmark interest rate at 2.25% earlier this month and projecting stronger growth in the second half of the year as inflation pressures subside.