Loonie Tumbles to Nine-Day Low Amid Fed Rate Hike Bets

The Canadian dollar weakened to its lowest level in nine days against the US dollar on Friday due to growing expectations of a Federal Reserve interest rate hike next week. The loonie traded at 1.3862 per US dollar, down 0.2% from the previous day's close, with its weakest intraday level since September 2.

Erik Bregar, director of FX & precious metals risk management at Silver Gold Bull, attributed the currency's weakness to rising expectations for Fed rate hikes. This came after US consumer prices accelerated in August, while a key measure of underlying inflation posted its largest increase in four months.

The Bank of Canada's more hawkish message last week, which indicated policymakers were prepared to raise borrowing costs multiple times if inflation remained too high, also contributed to the loonie's decline. Investors now see a 57% chance the Canadian central bank will tighten policy at its next decision on October 28.