The Canadian dollar weakened further on Monday, trading near a 12-day low of C$1.3929 against the U.S. dollar, as persistent domestic inflation pressures and a stronger greenback outpaced support from rising oil prices. By Friday’s close, the pair had fallen to C$1.3862, marking its weakest level since September 2, at C$1.3883. The Canadian dollar lost about 0.3% on the week, reflecting a broader trend of limited inflationary relief and heightened U.S. dollar demand amid geopolitical tensions and a technology sector selloff.
Canada’s August consumer price index (CPI) rose 3.0% year-over-year, unchanged from July and matching market expectations. On a monthly basis, prices fell 0.1%, though core inflation measures remained elevated. The Bank of Canada’s preferred measures—median and trimmed-mean inflation—stood at 2.0% and 1.9% respectively, just shy of its 2% target. Food inflation slowed to 2.8%, while gasoline prices surged 22.8% year-over-year, highlighting persistent energy-related pressures.
Oil prices briefly provided some offset, with Brent crude climbing above $108 a barrel on Monday. The surge stemmed from fresh attacks in the Middle East, intensifying concerns over global supply disruptions. However, the U.S. dollar’s strength—up nearly 0.4% on the week—dominated the exchange rate dynamics, as investors sought safe-haven assets amid geopolitical risks. The U.S. Federal Reserve’s rate-hike expectations remained high, with markets pricing in roughly a 90% chance of a hike in the coming months.
The Canadian dollar’s underperformance underscores the challenge of balancing domestic economic conditions with global risk sentiment. While oil prices offered temporary relief, the broader economic backdrop—marked by sticky inflation and a resilient U.S. dollar—continued to weigh on the loonie’s value.
