Canadian Dollar Hovers Near 12-Day Low as U.S. Dollar Surges

The Canadian dollar hovered near a 12-day low against the U.S. dollar, weakening about 0.3% as a broader greenback rally and surging Federal Reserve rate-hike expectations overwhelmed the traditional support of rising oil prices.

According to an Investing.com report, the currency traded around C$1.392 per U.S. dollar after touching an intra-session low of C$1.3929. The pressure on the loonie comes despite strong underlying commodity benchmarks, highlighting a disconnect between resource valuations and foreign exchange sentiment.

Canadian Inflation and Bank of Canada Metrics

The currency weakness arrives alongside the latest domestic inflation figures from Statistics Canada. Canada's consumer price index rose 3.0% year-on-year in August, matching the pace recorded in July.

On a monthly basis, prices slipped 0.1%. Meanwhile, underlying inflation pressures monitored by the central bank remained contained, with the Bank of Canada's median and trimmed-mean core measures holding at 2.0% and 1.9%, respectively.

Oil Prices Fail to Rescue Currency

Historically, a strong resource sector provides a reliable tailwind for the Canadian dollar. Brent crude climbed above $108 a barrel due to Middle East supply disruptions.

However, this energy surge failed to lift the loonie. Instead, rising commodity costs amplified global inflation concerns, feeding directly into higher U.S. monetary tightening expectations rather than flowing through to domestic currency gains.

U.S. Dollar Index and Rate Expectations

Financial markets priced in roughly a 90% chance of a Federal Reserve rate hike. This aggressive policy pricing pushed the U.S. dollar index up nearly 0.4%, bolstered by safe-haven demand and a concurrent tech stock selloff.