CAD/USD Hits 2-Month High
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The Canadian dollar recently reached a significant milestone, climbing to its highest level in two months against the US dollar (CAD/USD).
This surge saw the loonie appreciate by 0.5%, with the exchange rate touching 1.4211 CAD per USD, a level not seen since mid-December.
The strengthening of the Canadian currency can be attributed to several factors, including a decline in US Treasury yields and a broader weakening of the US dollar against major currencies.
This upward movement in the Canadian dollar was further bolstered by shifting market expectations regarding the Bank of Canada’s monetary policy.
The likelihood of an imminent rate cut by the central bank has diminished, with the swaps market now pricing in a lower probability of a March rate reduction. This change in sentiment has provided additional support for the loonie.
Recent economic data has also played a role in the currency’s performance. Unexpectedly low core PCE inflation figures from the US producer price report contributed to the dollar’s weakness, indirectly benefiting the Canadian dollar.
Additionally, the decision by former President Trump to delay the implementation of 25% tariffs on Mexican and Canadian goods has helped to calm market concerns, further supporting the loonie’s rise.
As of February 17, 2025, the CAD/USD exchange rate stands at 0.697626, showing a slight increase from previous weeks.
This recent strength in the Canadian dollar presents a mixed picture for potential buyers.
While the current rate is more favourable for those holding Canadian dollars compared to its recent low of 0.6876 USD on January 31, 2025, it’s still below the peak of 0.7000 USD seen on February 11, 2025.
The recent uptrend suggests potential for further gains, but currency markets are notoriously volatile and influenced by various factors including economic data, central bank policies, and geopolitical events.
Investors and currency buyers should carefully consider their risk tolerance and consult financial advisors before making significant currency transactions.
Sources: eToro, MarketScreener