The Canadian dollar held near a 12-day low against the U.S. dollar on Monday as a stronger greenback and rising expectations for a Federal Reserve rate increase outweighed support from higher oil prices. The loonie was around C$1.392 per U.S. dollar, down about 0.3% on the day, after touching C$1.3929, its lowest level in 12 days. The pair had traded at C$1.3862 on Friday and touched C$1.3883, its weakest level since Sept. 2.
Brent crude jumped above $108 a barrel on Monday amid fresh attacks and supply disruptions in the Middle East. The oil rally provided some support for the loonie, but it was not enough to offset dollar strength. The dollar index rose nearly 0.4% on Monday, supported by safe-haven demand linked to geopolitical tensions and a selloff in global technology stocks.
Canadian inflation data offered little additional support for the loonie. August consumer prices rose 3.0% year on year, unchanged from July and in line with expectations, while monthly prices fell 0.1%. The Bank of Canada's preferred median inflation measure was 2.0% and its trimmed-mean measure was 1.9%, against the central bank's 2% target. Food inflation slowed to 2.8%, while gasoline prices rose 22.8% from a year earlier.
Investors were focused on a potential U.S. Federal Reserve interest-rate increase scheduled for this week. Market pricing indicated roughly a 90% chance of a hike, adding to pressure on the Canadian dollar. The combination of firmer U.S. rate expectations, geopolitical risk and weaker domestic inflation support kept the loonie near recent lows.
