The Canadian dollar fell to its weakest level in seven months against the U.S. dollar, touching 1.4023 before recovering slightly to 1.3980, or 71.53 U.S. cents, on Thursday. This decline coincided with a widening gap between Canadian and U.S. two-year government bond yields, which reached its widest point since June 2025, according to livemint.com.
The loonie’s drop was driven primarily by the expanding interest rate differential between Canada and the United States, said Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets. The decline also followed weak domestic economic data released over recent weeks. Oil prices fluctuated during the session, with a 2% drop after the cancellation of Iran strikes, further influencing the currency’s movement, livemint.com reported.
The widening yield spread reflects diverging monetary policy expectations between the two countries, affecting investor demand for the Canadian dollar. The currency’s seven-month low underscores sensitivity to interest rate changes and commodity price shifts, particularly oil, which is a major export for Canada. The loonie’s performance contrasts with the U.S. dollar’s relative strength amid these factors, highlighting ongoing challenges in Canada’s economic outlook.
The Canadian dollar’s movement on Thursday was part of broader market reactions to economic data and geopolitical developments, with the two-year Canada-U.S. yield spread reaching its widest since June 2025. The next key data releases and central bank decisions will be closely watched for their impact on the currency’s trajectory, livemint.com noted.