The Canadian dollar advanced to a one-week high on Thursday, supported by signals from the Bank of Canada that inflation risks are intensifying, even as the central bank held its benchmark rate steady for a seventh consecutive meeting.
The loonie was up 0.20% at C$1.3817 per U.S. dollar by midday in New York, according to Investing.com data. Earlier in the session, it traded as high as C$1.3813 and as low as C$1.3848. On Wednesday, the currency had already gained 0.4% following the Bank of Canada’s policy announcement.
The Bank of Canada maintained its overnight rate at 2.25%, a level unchanged since January. Governor Tiff Macklem highlighted growing upside risks to inflation, citing elevated energy prices and the potential impact of U.S. tariffs on Canada’s economic outlook. The central bank’s stance reinforced expectations that borrowing costs could rise in the future, providing support to the Canadian dollar.
Higher oil prices, a key Canadian export, also contributed to the loonie’s strength. Crude prices have climbed in recent sessions, adding to the currency’s appeal as a commodity-linked asset. The loonie’s recent gains follow a decline to C$1.3939 per U.S. dollar on Tuesday, its weakest level since August 13.
Analysts, citing a Reuters poll published Thursday, project the loonie will weaken modestly to C$1.39 per U.S. dollar over the next three months. However, they anticipate a rebound to C$1.36 in 12 months, contingent on easing trade tensions between Ottawa and Washington. The near-term outlook reflects ongoing uncertainty over the interest-rate differential between Canada and the United States, as well as the potential for policy divergence in the coming quarters.
