Loonie Falls as Stronger Dollar and Yield Gap Take Toll

The Canadian dollar is under pressure as the U.S. dollar strengthens and yield differentials widen, putting the loonie near its weakest levels in several weeks.

The USD/CAD pair has climbed sharply from around C$1.40 earlier in September to trade at C$1.424 on Thursday morning, with investors assessing fresh U.S. labour-market data and volatile oil prices.

The widening gap between U.S. and Canadian bond yields is a major factor in the pressure on the loonie, making dollar-denominated assets more attractive. The Canadian dollar had already fallen to a 12-week low last week as Canadian yields declined relative to U.S. rates.