The Canadian dollar reached a six-week intraday peak Thursday as the U.S. yield premium over Canadian two-year government debt narrowed, a market shift Reuters reported amid separate rate decisions in Ottawa and Washington.
The loonie touched C$1.3966 per U.S. dollar, its highest level since Sept. 16. Reuters reported that it was later up 0.1% at C$1.3982. The figures were intraday market readings, not the Bank of Canada’s daily reference rate.
Reuters put U.S. two-year yields 1.28 percentage points above Canadian yields, with that premium 4.7 basis points narrower. The report said the gap’s early-October peak was 1.60 percentage points, its widest since February 2025. Reuters linked the smaller gap to support for the Canadian dollar and also cited elevated oil prices.
The Bank of Canada raised its overnight-rate target by 25 basis points to 2.5% on Oct. 28. The Federal Open Market Committee (FOMC) held the federal funds target range at 3.75% to 4% that day. The vote was 10-2, with two members preferring a quarter-point increase.
The Bank said inflation had remained near 3% since April and could reach about 3.5% by year-end amid persistently high oil prices. It said the rate increase was intended to limit the risk that higher energy costs spread to other prices. The Bank also said another increase may be needed.
Reuters quoted Amo Sahota, director at Klarity FX, saying the yield move was “giving traders conviction.” The report also cited oil prices as support for the loonie.
The Bank of Canada’s next scheduled rate announcement is Dec. 9.
