Loonie Gains as Softer US Inflation Data Dims Rate-Hike Bets

The Canadian dollar strengthened against its US counterpart on Wednesday, as softer-than-expected US inflation data reduced expectations for an imminent Federal Reserve interest-rate hike.

According to Investing.com, the US Personal Consumption Expenditures price index rose 0.3% in August, below economists' expectations of a 0.4% increase. Annual PCE inflation was 3.4%, while core PCE inflation held at 3.0%, also below expectations.

This led to markets scaling back expectations for an October Fed rate hike, weighing on the US dollar and Treasury yields. The dollar index fell by about 0.2% in the latest trading, while the US two-year Treasury yield dropped more than four basis points.

The Canadian dollar received some support from oil prices, which rose to around $103.45 a barrel, bolstering the currency due to Canada's status as a major oil exporter.