Canadian Dollar Nears Three-Month High on Weaker US Dollar

The Canadian dollar strengthened to 1.38 per USD in late August, nearing a three-month high, supported by a weaker US dollar and elevated crude oil prices.

The loonie’s gains were primarily driven by renewed pressure on the greenback as investors reassessed the Federal Reserve’s policy path.

Recent US economic data, including softer inflation readings, fueled expectations that the Fed could begin cutting interest rates sooner than previously anticipated, weighing on the dollar and supporting commodity-linked currencies.

Meanwhile, crude oil prices remained elevated near multi-month highs, benefiting the Canadian currency as higher energy prices improve the country’s terms of trade.

On the trade front, Canadian and US negotiators are set to meet in an effort to finalize a deal that could ease months of tariffs and counter-tariffs.

Canadian bond yields rose across the curve, tracking higher US Treasury yields.