Canadian Dollar Weakens to 1-Year Low

The Canadian dollar sank to a one-year low of 1.42 per USD in late June amid, tracking other G10 currencies as the outlook of a hawkish Fed supported the US dollar. Multiple FOMC members projected more than one rate hike this year as US inflation picks up. Meanwhile, core inflation rates tracked by the Bank of Canada remained near their 2% target in May despite the surge in energy prices during the period, aligning with the central bank's earlier signal that the war in Iran may only have transitionary effects on headline price growth. The Bank of Canada kept its key interest rate unchanged at 2.25% at its latest meeting, and signaled that it sees risks on both sides of its inflation and employment mandate amid the uncertain economic backdrop.

The Canadian Dollar touched 1.41 against the USD, the lowest since April 2025. Over the past 4 weeks, US Dollar Canadian Dollar gained 2.88%, and in the last 12 months, it increased 3.22%.

The Canadian dollar weakened to around 1.41 per USD following the Fed's latest policy decision, hovering near a seven-month low. As widely expected, the Federal Reserve left interest rates unchanged. However, its projections were viewed as more hawkish than anticipated, with roughly half of FOMC members expecting at least one rate hike this year. Meanwhile, the BoC kept its key interest rate unchanged at 2.25% at its latest meeting. The central bank said uncertainty remains elevated amid conflict in the Middle East and US tariff proposals, but reiterated that it stands ready to act if needed and will not allow high energy prices to trigger persistent inflation. Investors largely expect the BoC to raise borrowing costs by 25 basis points in December.