The weakening Canadian dollar is tied to the U.S. federal reserve continuously hiking its key overnight lending rate to curb inflation.
Relentlessly high inflation in the U.S. has the country’s central bank raising rates aggressively, with a three-quarter percentage point hike expected on Sept. 21.
Over the last year, the Canadian dollar has been gradually sliding in comparison to a “very strong” U.S. dollar, said Shaun Osborne, foreign exchange analyst with Scotiabank. The reason isn’t fully known, said Osborne, but less investment in the oil sector and the greenification of the country’s economy could both be factors.
While the Canadian dollar has dropped, it’s done comparatively well compared to the euro, British pound, and Japanese yen. For example, in the last year, the Japanese yen dropped by almost 25 per cent making the currency much weaker, whereas the Canadian dollar dropped by four per cent during the same time period.