Canadian Dollar Extends Losing Streak to Eight Days as U.S.-Canada Yield Gap Widens
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The Canadian dollar weakened again against its U.S. counterpart on Friday, extending a prolonged losing streak as the widening gap between Canadian and U.S. bond yields continued to weigh on the loonie ahead of fresh signals from the Bank of Canada.
The loonie was trading near C$1.4010 per U.S. dollar, or about 71.38 U.S. cents, after touching C$1.40144 during the session, its weakest intraday level since August 7. The move put the currency on course for an eighth consecutive daily decline, its longest such losing streak since May.
For the week, the Canadian dollar was down about 1%, with pressure intensifying after the U.S. Federal Reserve raised interest rates and signalled that borrowing costs could rise further in the coming months.
The widening yield differential has become a key factor behind the loonie’s weakness. Canada’s two-year government bond yield was trading about 142 basis points below its U.S. equivalent, the widest gap since July 28. Scotiabank strategists Shaun Osborne and Eric Theoret said the broader U.S.-Canada yield spread accounted for much of the Canadian dollar’s recent decline.
Attention is now shifting to the Bank of Canada, where investors see roughly a 60% chance of an interest-rate increase at the next policy announcement on October 28. The central bank held its policy rate at 2.25% earlier this month but has indicated that further tightening could be necessary if inflation pressures remain elevated.
Bank of Canada Governor Tiff Macklem is scheduled to speak Monday on economic developments, giving markets another opportunity to assess whether policymakers are preparing for a possible rate increase. Scotiabank strategists said his remarks could reinforce the more hawkish tone adopted following the bank’s latest meeting
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Tahani Elghazaly5012 Posts
