The Canadian dollar weakened to nearly a five-year low against the U.S. dollar on Tuesday, driven by domestic political unrest and a widening gap between Canadian and U.S. bond yields. The loonie fell 0.6% to 1.4323 per U.S. dollar, its weakest level since March 2020. Factors contributing to the decline include the sudden resignation of Canada's finance minister, concerns over potential U.S. sanctions, and a surprise easing of Canadian inflation.
weakened to nearly a five-year low against its U.S. counterpart on Tuesday, hurt by domestic political unrest as well as a wider gap between Canadian and U.S. bond yields after data showed a surprise easing of Canadian inflation.
“The driver today seems to be the ongoing rally in Canadian yields on a relative basis,” said Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets. “We think this level of political turbulence will raise uncertainty levels for Canadian consumers and businesses, adding to the headwinds already facing productivity-enhancing investment,” Karl Schamotta, chief market strategist at Corpay, said in a note.
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