The Canadian dollar strengthened against its U.S. counterpart on Thursday as the greenback retreated from an 18-month high, although a sharper-than-expected surge in U.S. producer prices raised concerns about persistent inflation and the possibility of further monetary tightening by the Federal Reserve.
The U.S. dollar was last down 0.29% against the Canadian dollar at C$1.4197 around 8:24 a.m. ET, after trading between C$1.4195 and C$1.4241. A decline in the USD/CAD exchange rate indicates a stronger Canadian dollar.
U.S. producer prices for final demand jumped 1.3% in September from the previous month, sharply exceeding economists’ expectations of a 0.6% increase and accelerating from August’s 0.5% rise.
On an annual basis, the producer price index climbed 6.3%, up from 5.6% in August and well above forecasts of 5.3%, underscoring mounting price pressures across the U.S. economy.
The figures followed hotter-than-expected U.S. consumer inflation data, reinforcing concerns that stubborn inflation could force the Federal Reserve to maintain restrictive monetary policy for longer than previously anticipated.
The dollar index fell 0.2% to 102.03 earlier on Thursday, reversing some gains from the previous session, while easing U.S. Treasury yields offered temporary support to the Canadian currency.
Investors will now assess whether the latest inflation readings strengthen expectations for another Federal Reserve rate increase, potentially renewing pressure on the Canadian dollar as interest-rate differentials and global risk sentiment influence currency markets.
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