Loonie Sinks as USD/CAD Hits 1.4150 Amid Widening Interest Rate Gap
The Canadian Dollar has been on a downward trend for the past month, and its value is now at its lowest since mid-July. The USD/CAD exchange rate is trading near 1.4150, its highest level in months, and is poised to extend its winning streak to five sessions in a row.
The recent slide began after Canada imposed counter-tariffs on $27.6 billion worth of US goods on September 8. This move has had a significant impact on the Loonie, causing it to lose ground against the US dollar. Despite the decline in oil prices, which is one of Canada's main exports, the Canadian Dollar has continued to fall.
The Bank of Canada (BoC) is set to make its next interest rate decision on October 28, and investors are waiting with bated breath to see what it will do. The BoC has held interest rates steady at 2.25% for seven consecutive meetings, while the US Federal Reserve raised its rates to 3.75-4.00% in September.
The gap between Canadian and US interest rates is now around 1.25 points, making it more attractive for investors to hold US assets. This has led to a surge in demand for US dollars, further putting downward pressure on the Canadian Dollar.