Loonie Suffers as Fed Rate Hike Bets Drive Dollar Down

The Canadian dollar weakened on Tuesday against its US counterpart as investors bet on a Federal Reserve interest rate hike next month.

A sell-off in global bond markets also contributed to domestic borrowing costs ahead of a Bank of Canada interest rate decision, causing the loonie to drop 0.4% to 1.3905 per US dollar or 71.92 US cents.

This made it one of the biggest decliners among Group of 10 currencies, according to Amo Sahota, director who said 'The loonie is clearly a laggard in G10 FX today as traders continue to increase bets that the Fed will have to raise interest rates in September to meet its 2% target.'