The Canadian dollar is holding steady to start the week, having climbed about half a penny to close last week. This comes after the Canadian dollar touched a seven-month low against the US dollar earlier in October. The primary driver for the USD/CAD pairing continues to be US Treasury yields, which recently hit their highest level since 2007.
U.S Treasury yields refer to the interest rates on debt securities issued by the U.S. Department of the Treasury. These debt securities, commonly known as “Treasuries,” come in various maturities, ranging from a few days to 30 years. The yield of a Treasury security essentially represents the return an investor will receive by holding the bond to maturity. Higher Treasury yields increase the demand for US Dollars as investors seek US Dollar holdings to benefit from these yields.
The US dollar is also benefiting from safe-haven flows as global equity markets continue to trend lower primarily due to concerns about the Fed’s outlook of keeping rates ‘higher for longer’ strategy, which boosts demand for the US dollar.
The Canadian dollar is expected to remain relatively quiet leading up to Wednesday’s Bank of Canada interest rate announcement. Most market experts anticipate that the Bank of Canada will keep rates unchanged. This expectation is in light of last week’s larger-than-expected drop in inflation. The fireworks (if any) are anticipated to come from the BoC’s statement and press conference, where the bank may provide some insight into its future moves.
The Canadian dollar is currently trading at 1.3683 against the US Dollar.
