The Canadian dollar weakened to around C$1.3910 per U.S. dollar, or 71.9 U.S. cents, after touching a 12‑day low of C$1.3929 on Monday. The decline came despite a sharp rally in crude oil, with Brent futures climbing above $107 a barrel and later quoted at $108.65.
Higher oil prices would normally support the loonie, given Canada’s status as a net oil exporter. In this case, the surge in oil prices coincided with a rise in U.S. Treasury yields, which breached the 5% threshold on the 10‑year benchmark. The yield increase has heightened expectations that the Federal Reserve will raise its policy rate at its Wednesday meeting, outweighing the currency‑supporting effect of higher oil prices.
Canada’s own inflation held steady in August, adding to the backdrop of rate‑sensitivity. Market participants noted that the combination of elevated U.S. yields and lingering inflation concerns could pressure the loonie further if the Fed signals a tighter stance.
The broader market environment remained risk‑off, with geopolitical tensions and uncertainty over the global economic outlook contributing to a cautious tone across assets. The Bank of Canada and the U.S. Treasury were cited as key institutions monitoring the developments.
Analysts indicated that the loonie’s trajectory will hinge on the Fed’s policy decision and any subsequent moves in U.S. yields, as well as the direction of oil prices. For now, the currency appears caught between the dual forces of commodity strength and higher‑rate expectations.
