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Canadian Dollar Lingers Near Multi-Week Lows as U.S. Dollar Strength Persists
Summary
The Canadian dollar traded near its weakest levels in two months on Friday, as a broadly stronger U.S. dollar, fueled by rising Treasury yields, continued to outweigh support from high energy prices.
The Canadian dollar held steady in early Friday trading but remained under significant pressure near multi-week lows, pinned down by the sustained strength of the U.S. dollar and elevated American bond yields.
Dollar and Yields Drive Weakness
The primary driver for the Canadian currency's recent weakness has been external. As of 8:54 a.m. ET, the USD/CAD pair traded at approximately C$1.4149, a modest gain of 0.08% on the day, according to Investing.com data. This movement continues a trend that saw the loonie hit a two-month low earlier in the week.
The U.S. dollar is on track for its second consecutive weekly gain, bolstered by surging U.S. Treasury yields. Markets are increasingly pricing in a more hawkish monetary policy path from the Federal Reserve, which enhances the appeal of the greenback and widens the interest rate differential between the U.S. and Canada.
AdTraditional Supports Fail to Lift Loonie
Compounding the pressure on the Canadian dollar were weak domestic retail sales figures released earlier in the week, which soured sentiment on the country's economic outlook.
Notably, the Canadian dollar's softness has persisted despite relatively high oil prices. This indicates that the traditional support the currency receives from Canada's significant energy exports is currently being overshadowed by the powerful influence of U.S. interest rate expectations and the resulting strength of the U.S. dollar.
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