Canadian dollar slides to 2026 low as traders expect Bank of Canada to hold rates

The Canadian dollar reached its weakest point since December 2025 on June 9, trading at 1.3969 USD, equivalent to roughly 71.67 U.S. cents per loonie. Traders increasingly expect the Bank of Canada (BoC) to keep its policy rate unchanged at 2.25% for the remainder of 2026, a stance that has fueled bearish bets on the currency. Speculative short positions on the Canadian dollar have climbed to their highest levels since late 2025, reflecting expectations that the loonie will weaken further. The yield gap between Canadian and U.S. government bonds has narrowed, reducing demand for Canadian-dollar assets amid higher U.S. interest rates. Energy costs remain a key driver of inflation in Canada, yet the BoC has shown reluctance to raise rates, fearing potential damage to economic growth. Meanwhile, elevated gold prices have failed to support the currency due to broader market uncertainty, and volatile oil prices have stripped away traditional support for the loonie. Economists from the National Bank of Canada and BMO have warned that Canada’s trade dependence on the U.S. and geopolitical risks could further destabilize the currency. A weaker Canadian dollar increases import costs for consumers and businesses, potentially worsening inflation, though it benefits exporters by making their goods more competitive abroad. The BoC’s June 10 policy meeting will be critical, as markets have already priced in a rate hold. Any hint of a more hawkish stance could trigger a sharp rebound in the loonie, given the elevated speculative short positions. Investors will closely watch the central bank’s statement and press conference for clues on future monetary policy direction.