Canadian dollar extends weekly losing streak as interest rate gap widens

The Canadian dollar extended its weekly decline against the US dollar on Friday, pressured by lower oil prices and a continued widening of the interest rate differential between the United States and Canada.

The Canadian dollar fell 0.3% to C$1.4257 per US dollar, or 70.14 US cents, after trading in a range of C$1.4202 to C$1.42595 during the session. On Thursday, the Canadian currency touched an 18-month low of C$1.4263 per US dollar.

For the week, the Canadian dollar is down 0.8% and is on track for a fourth consecutive weekly decline, as the US dollar continues its recent gains against a basket of major currencies.

“Higher oil prices and concerns that inflation could remain elevated have increased pressure on global central banks to adopt a more hawkish stance,” said Sarah Ying, head of foreign exchange market strategy at CIBC Capital Markets.

“The United States is still seen as being in a relatively better position compared with the rest of the world, while fiscal concerns in Europe leave investors with few alternatives to the US dollar,” she added.

Widening bond yield gap pressures Canadian dollar

US job growth slowed more than expected in September, while nonfarm payroll figures for the previous two months were revised sharply lower, virtually ruling out another Federal Reserve interest rate hike this month.

Nevertheless, Canada’s two-year bond yield fell by an additional 4 basis points relative to its US counterpart, widening the gap to around 157 basis points, the largest since February 2025.

US crude oil, one of Canada’s major exports, gave back some of the previous day’s gains after G7 countries agreed to release 100 million barrels of diesel and crude oil from emergency reserves.

US crude futures were trading 1.6% lower at $91.40 a barrel.

Canada’s 10-year bond yield rose around 1 basis point to 3.940%, but remained below the nearly three-year high of 4.042% reached during Thursday’s session.