Canadian Dollar Poised for First Weekly Gain in Six Weeks on Weaker Greenback, Oil Strength

The Canadian dollar is on track for its first weekly gain in over a month, breaking a five-week run of losses as a weaker U.S. dollar and firmer oil prices provided significant tailwinds. The loonie traded around C$1.4170 per U.S. dollar (70.57 U.S. cents) during Friday's morning session, putting it on course for a weekly advance of roughly 0.6%.

U.S. Dollar Retreats on Fed Outlook

The primary driver for the loonie's recovery has been a broad-based pullback in the U.S. dollar. The greenback was heading for a weekly decline against a basket of major currencies following comments from Federal Reserve Chair Kevin Warsh that bolstered expectations for policymakers to leave interest rates unchanged at their upcoming October meeting.

A softer U.S. dollar typically supports the Canadian currency by making it relatively cheaper for international investors to purchase. This week's move marks a reversal from the prior week when weak Canadian employment data dampened expectations for a Bank of Canada rate hike and pushed the loonie to an 18-month low.

Oil Prices Provide Key Support

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Rising commodity prices offered another layer of support for the currency of the major energy-exporting nation. Key oil benchmarks posted notable weekly gains amid supply concerns and a significant drawdown in U.S. crude inventories.

• Brent crude rose approximately 1.4% for the week to trade at $106.28 a barrel.
• U.S. West Texas Intermediate (WTI) crude gained 6.4% to reach $97.78 a barrel.

While the loonie is sensitive to crude prices, its trajectory is also heavily influenced by wider movements in the U.S. dollar and shifting interest-rate expectations. Investors are also digesting new U.S. inflation signals after producer prices in September recorded their largest monthly increase in over four years, raising concerns about persistent price pressures.