Canadian Dollar Posts Largest Monthly Gain Since April on Rate Hike and Oil Strength
The Canadian dollar rose 1.9% in October, its biggest monthly gain since April, supported by the Bank of Canada's first interest rate increase in over three years, elevated oil prices, and reduced political uncertainty after Alberta voters rejected separation.
The Canadian dollar advanced as much as 0.2% against the U.S. dollar on Thursday, reaching its strongest level in more than a month. The currency's October advance reached 1.9%, marking its largest monthly gain since April.
Higher oil prices and tighter monetary policy have supported the commodity-linked currency. On Wednesday, the Bank of Canada raised interest rates for the first time in more than three years to address upside inflation risks stemming from higher energy prices. Canadian inflation accelerated to 3.1% in September due to climbing gasoline prices.
The central bank has also revised its longer-term outlook. It now forecasts inflation averaging 3.1% in 2027, up from its previous two per cent forecast, and expects yearly inflation will not return to the two per cent target until the middle of 2028.
The loonie received an additional boost last week when Alberta voters rejected separation from Canada, easing political uncertainty surrounding the country's western province.