2026.01.2815:06:32UTC+00Canadian Dollar Rises to 16-Month High

The Canadian dollar has strengthened to around 1.35 against the US dollar, marking its highest level in roughly sixteen months. This shift comes as markets evaluate the Bank of Canada's recent policy decisions and guidance. Despite the ongoing challenges posed by US tariffs and continued trade uncertainties, which hinder Canada’s export growth, investment, and labor market adjustments, the Bank of Canada anticipates moderate GDP growth, projecting figures of approximately 1.1% in 2026 and 1.5% in 2027. This growth projection suggests that the existing excess supply should broadly counterbalance tariff-induced cost increases, maintaining inflation near the 2% target. Additionally, the Canadian dollar's movement was intensified by a broader weakness in the US dollar, with the dollar index hovering around a four-year low. This decline in the US dollar was influenced by President Trump suggesting his approval for a weaker currency to boost exports and his renewed criticism of the Federal Reserve, which added to policy uncertainties. Meanwhile, speculation about potential US-Japan cooperation to support the yen exerted additional pressure.