Loonie Loses Ground Against Major Currencies Amid Global Central Bank Shifts
The Canadian dollar experienced significant weakness against major currencies in the week ending September 18. The USD/CAD surged to 1.4005, its highest level in a month, while other currencies such as the euro and yen also showed declines against the loonie.
Global central banks' diverging policies and commodity price movements failed to support the Canadian dollar, resulting in its underperformance. The U.S. Federal Reserve's rate hike to 4.00% on September 16 intensified the yield gap, making the U.S. dollar more attractive.
The Bank of Canada had little reason to intervene due to steady inflation and flat job numbers. Oil prices above $107 failed to provide a significant tailwind for the Canadian dollar, as risk aversion and U.S. dollar strength offset its potential benefits.