Bank of Canada’s Surprise Hawkish Turn Supports Canadian Dollar Amid U.S. Dollar Pressure

According to Jin10, the U.S. dollar weakened broadly during Friday’s Asian session, pushing USD/CAD lower for a third consecutive trading day. Weak technology-company earnings fueled concerns that rising artificial intelligence spending might not generate sufficient returns, prompting investors to seek the safety of government bonds and adding to pressure on the U.S. dollar and the currency pair. Hawkish Federal Reserve policy expectations helped the safe-haven U.S. dollar attract some buying near this week’s low. Traders appeared confident that the Fed would raise interest rates in December, while U.S. economic data released Thursday showed resilience and persistent price pressures, reinforcing those expectations. High oil prices also added to inflation risks and the prospect of further Fed tightening. The Bank of Canada raised interest rates on Wednesday for the first time since July 2023, marking a sudden shift toward tighter monetary policy. The move appeared to limit the Canadian dollar’s downside and could discourage bets on a rise in USD/CAD, warranting caution before anticipating a significant rebound in the pair.