Canadian dollar steadies after seven-day rally ahead of rate decisions

The Canadian dollar steadied against its U.S. counterpart on Monday after seven consecutive sessions of gains, as investors paused ahead of interest rate decisions by the Bank of Canada and the U.S. Federal Reserve later this week.

The loonie was trading nearly unchanged at C$1.4010 per U.S. dollar, or 71.38 U.S. cents. It traded between C$1.3999 and C$1.4055 during the session.

The Canadian currency’s seven-day winning streak was its longest since March 2022. It reached its strongest intraday level since September 16 on Friday, touching C$1.3966 per U.S. dollar, before giving up some ground.

Investors are positioning ahead of the Bank of Canada’s monetary policy decision on Wednesday, October 28, with markets expecting a potential rate increase as policymakers assess the risk that higher energy prices could fuel broader inflation. However, a softer domestic economic outlook could complicate the central bank’s decision.

Oil prices and movements in the U.S. dollar are also likely to influence the loonie, given Canada’s status as a major energy exporter. Changes in geopolitical tensions could affect both crude prices and demand for the U.S. dollar as a safe-haven asset.

The Federal Reserve’s policy decision, also due Wednesday, will provide another focus for currency traders, with the outlook for interest rates in both countries likely to shape the Canadian dollar’s near-term direction.