The Canadian dollar advanced to its highest level in more than a week against the U.S. dollar on Thursday, as investors reassessed inflation risks following the Bank of Canada’s latest policy guidance.
The loonie was last trading 0.20% higher at C$1.3817 per U.S. dollar, equivalent to roughly 72.37 U.S. cents, after opening at 1.3844. The currency has recovered from Tuesday’s low of 1.3939 per U.S. dollar, its weakest level since August 13, and gained 0.4% the previous session.
The Bank of Canada held its benchmark policy rate at 2.25% for a seventh consecutive meeting, citing persistent upside risks to inflation. Governor Tiff Macklem highlighted the impact of elevated energy prices and U.S. trade tariffs on Canada’s inflation outlook, reinforcing expectations that borrowing costs could rise in the future.
Analysts, citing a Reuters poll published Thursday, project the loonie to weaken modestly to 1.39 per U.S. dollar over the next three months. However, they anticipate a rebound to 1.36 per U.S. dollar within 12 months if trade tensions between the U.S. and Canada ease.
