30.03.202614:07:47UTC+00Canadian Dollar Weakens to December Lows

The Canadian dollar weakened beyond 1.39 per US dollar to a new December low, as ongoing geopolitical tensions and expectations of a more hawkish Federal Reserve strengthened the greenback. Even with energy prices climbing to their highest levels since 2022 following the effective closure of the Strait of Hormuz, the commodity-linked loonie failed to gain traction against a broadly stronger US dollar.

Market doubts over the prospect of de-escalation in the Middle East deepened after Iran rejected a 15-point US peace proposal and denied that any negotiations were underway, while the United States deployed additional troops to the region. These developments have heightened inflation concerns and prompted traders to scale back expectations for further Federal Reserve rate cuts, instead increasing bets on a possible rate hike before year-end.

Rising US Treasury yields, combined with the US dollar’s role as the world’s primary reserve currency, continue to weigh on the loonie, even as the Bank of Canada holds its policy rate at 2.25%.