Canadian Dollar Hits 4-week Low

The Canadian dollar weakened to near 1.40 per USD in mid-September, its lowest level in more than a month after the US Federal Reserve raised interest rates as expected. The Fed raised the target range for the federal funds rate by 25 bps to 3.75%-4%, reinforcing the US dollar’s advantage over the loonie. Updated Fed projections showed that most policymakers expect another hike before the end of 2026, widening the interest-rate differential between the US and Canada. The Bank of Canada kept its key policy rate unchanged at 2.25% at its September meeting, as widely expected. However, it noted that inflation risks had increased, while new tariffs had made the growth outlook more uncertain. The BoC left the future path of monetary policy open, saying it would adjust policy as needed. Governor Macklem said policymakers were prepared to raise rates if inflation remained elevated.

The Canadian Dollar touched 1.39 against the USD, the lowest since August 2026. Over the past 4 weeks, US Dollar Canadian Dollar gained 0.48%, and in the last 12 months, it increased 1.23%.

The Canadian dollar weakened to around 1.39 per USD in mid-September, a one-month low, after a relatively tame inflation report. The headline CPI rose 3.0% year-on-year in August, unchanged from July and matching market expectations. The Bank of Canada’s preferred median and trimmed-mean measures remained contained at 2.0% and 1.9%, respectively, refraining from accelerating despite soaring energy costs. Meanwhile, escalating conflict in the Middle East continued to raise wholesale oil and fuel prices. Higher oil prices typically support the Canadian dollar, as Canada is a major crude exporter, but the latest surge is also reviving inflation concerns and strengthening the case for tighter US monetary policy. The Fed is expected to raise interest rates on September 16th, supporting the US dollar.