The Canadian dollar slipped about 0.3% on Thursday, touching a four month low as the greenback advanced after stronger U.S. economic readings.
By late afternoon, the loonie traded near 1.3940 per U.S. dollar, or roughly 71.7 U.S. cents, with dealers pointing to resilient American growth and labor data that supported the dollar across majors.
The move capped a choppy September for Canada’s currency, which has struggled to hold gains even when oil prices steadied.
The recent U.S. data pulse, including upside surprises on output and hiring, reinforced a view that the Federal Reserve may not feel compelled to accelerate rate cuts that dynamic tends to favor the dollar and weighs on peers such as the loonie.
Domestic catalysts were thin, leaving traders focused on Friday’s release of Canadian GDP for July and the U.S. personal consumption expenditures price index, a key inflation gauge.
Economists expect only marginal growth in Canada, reflecting the drag from prior rate hikes on households and interest-sensitive sectors.
On policy, the Bank of Canada has recently shifted to an easier stance as inflation pressures moderated and growth cooled.
Markets are still debating how far policymakers will go, but the combination of a steadier Fed and a more accommodative BoC has widened interest rate differentials in ways that can pressure the loonie.
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Canadian bond yields tracked Treasuries, with the 10-year edging higher alongside the U.S. move, another sign that global rate expectations.
Equity sentiment was mixed, with the S&P/TSX Composite easing from recent highs as investors rotated after a strong quarter. Currency desks noted that stock moves had limited influence compared with the dollar’s broad rally.
A softer currency can help manufacturers and energy producers on price competitiveness, but that benefit is muted if end-market demand cools.
With the U.S. still expanding and Canada’s domestic demand downshifting, some economists see a modest tailwind for exporters even as financial conditions remain tight.
