FX.co ★ Canadian Dollar Nears Three-Month High

The Canadian dollar strengthened to 1.38 per USD in late August, approaching a three-month high, supported by a weaker US dollar and firm crude oil prices. The loonie’s advance was largely driven by renewed downward pressure on the greenback as investors reassessed the Federal Reserve’s policy trajectory. Softer US economic data, including weaker inflation readings, has reinforced expectations that the Fed may start cutting interest rates sooner than previously anticipated, undermining the dollar and bolstering commodity-linked currencies. At the same time, crude oil prices held near multi-month highs, providing additional support for the Canadian currency, as higher energy prices improve Canada’s terms of trade. On the trade front, Canadian and US negotiators are scheduled to meet in an effort to finalize an agreement that could resolve months of tariffs and counter-tariffs. Canadian government bond yields climbed across the curve, following the move higher in US Treasury yields.