Suspected Japanese intervention and softer US inflation data weigh on the USD, lifting the CAD to its strongest level in six weeks.
The Canadian Dollar strengthened to 1.3996 against the USD, marking a six-week low for the pair, as the US Dollar weakened broadly. The decline followed a sharp 480-pip drop in USD/JPY below 160.00, fueling speculation of Japanese intervention to support the Yen.
Weaker-than-expected US Q2 GDP and softer core PCE inflation data reduced expectations for a September Fed rate hike. The CME FedWatch Tool now shows a 55% chance of a 25-basis-point increase, down from 60% earlier. The Fed held rates steady at 3.50%-3.75% in its latest meeting, though three policymakers voted for an immediate hike.
Higher oil prices, driven by Middle East tensions, also supported the commodity-linked CAD. West Texas Intermediate crude remains elevated, reinforcing the currency’s gains.