The Canadian dollar remained under pressure early Thursday as a stronger U.S. dollar and widening bond-yield differentials weighed on the currency. Investors were also assessing fresh U.S. labour-market data and continued volatility in oil prices.
USD/CAD Holds Near Recent Highs
At 8:37 a.m. ET, USD/CAD was trading near the C$1.424 level, putting the Canadian dollar at around 70.2 U.S. cents.
The pair opened close to C$1.4236 and remained near the upper end of the session’s trading range, according to intraday market data.
The latest move continues the Canadian dollar’s recent weakening trend. USD/CAD climbed to C$1.4236 on Wednesday after opening at C$1.4191.
The pair has also risen significantly from levels near C$1.40 seen earlier in September.
U.S.-Canada Yield Gap Pressures the Loonie
One of the main factors weighing on the Canadian dollar is the widening gap between U.S. and Canadian bond yields.
Higher U.S. yields can make dollar-denominated assets more attractive to investors, increasing demand for the U.S. currency.
The Canadian dollar had already fallen to a 12-week low last week as Canadian bond yields declined relative to U.S. rates.
U.S. Dollar Remains Strong
The U.S. dollar continues to receive support from elevated Treasury yields.
Investors are also watching the potential inflation impact of higher energy prices. Persistent inflation could keep U.S. interest rates higher for longer, providing additional support for the dollar.
Reuters reported Thursday that the U.S. dollar remained close to a two-month high against a basket of major currencies.
Oil Price Volatility Adds More Pressure
Oil prices remain another important factor for the Canadian dollar because Canada is a major energy exporter.
Crude oil markets have been volatile amid ongoing geopolitical tensions, while global bond yields have also moved sharply higher.
The combination of volatile oil prices and a global bond-market selloff has added to uncertainty across Canadian financial markets.
Labour-Market Data in Focus
Investors are also monitoring fresh U.S. labour-market indicators.
Key releases include weekly U.S. jobless claims and the Challenger job-cuts report. These figures arrive ahead of Friday’s closely watched U.S. employment report.
Canada’s manufacturing PMI is also scheduled for release during the session and could provide further clues about the strength of the domestic economy.
For now, USD/CAD remains elevated as U.S. dollar strength, widening yield differentials and uncertain oil-market conditions continue to pressure the Canadian dollar.
