The Canadian dollar moved lower against the U.S. dollar in early trading on Monday, with USD/CAD around C$1.4150, an intraday increase for the pair of roughly 0.06%.
Trading during the session ranged between approximately C$1.4142 and C$1.4165, compared with a prior close near C$1.4141. The decline continues a trend from last week when the loonie suffered its third consecutive weekly loss.
On Friday the Canadian dollar fell to about C$1.4154, a near 10-week low, as Canadian bond yields declined further relative to U.S. yields. By that day the two-year Canada-U.S. yield spread had widened to roughly 153 basis points, its largest gap since February 2025, a dynamic that made U.S. assets relatively more attractive and weighed on the Canadian unit.
Energy markets provided less support to the loonie. Oil prices eased from recent highs as market participants assessed the possibility of a U.S.-Iran agreement. That decline in crude removed some of the lift the Canadian dollar typically receives from Canada’s sizable energy exports.
The net effect has been a reversal of much of the Canadian dollar’s gains earlier in September. USD/CAD has climbed from roughly C$1.38 at the start of the month to levels above C$1.41, bringing the loonie back close to exchange-rate territory last seen in mid-July.
Market context and mechanics
The near-term weakness in the Canadian dollar reflects two interrelated forces cited by market observers: a larger yield advantage in U.S. assets and weakening oil prices. The wider two-year yield differential has made U.S. borrowing returns comparatively more appealing, while softer crude has diminished a key export-driven support for the Canadian currency.
Those factors combined to push USD/CAD higher in recent sessions and help explain the loonie’s surrender of September gains.
Implications for markets
- Foreign exchange markets - USD strength against CAD as yield and commodity dynamics shift investor preference.
- Bond markets - The pronounced two-year yield spread between Canada and the U.S. is influencing cross-border capital allocation.
- Energy sector - A retreat in oil prices is reducing support for the commodity-linked Canadian dollar.