Loonie Hits 18-Month Low as US Dollar Surges on Rising Bond Yields
The Canadian dollar, also known as the loonie, has hit an 18-month low after briefly touching 1.4263 per US dollar. This weakness is largely due to the strengthening of the US dollar, which has been boosted by rising US bond yields. The yield on the 10-year US Treasury pushed toward a 24-year high near 5.34%, making US assets more attractive and lifting the greenback.
Despite some support from oil prices, which rose 1.9% to $92.16 a barrel after China suspended some refined-product exports, domestic momentum looked softer. The S&P Global manufacturing purchasing managers' index (PMI) slipped to 51.5 in September from 53.0, the lowest since March.
As a result of the loonie's weakness, Canadian consumers will face higher prices for US imports and online purchases billed in USD, even if the US sticker price hasn't changed. This can complicate life for the Bank of Canada, which may need to balance weaker growth signals with potential inflation pressures from a cheaper currency.