The Canadian Dollar Slid for Eight Straight Sessions. Two Central Banks Explain Why
The Canadian dollar closed Friday at 1.4002 against the US dollar, an eighth consecutive session of weakening and the loonie’s weakest close since August 6. At that level one Canadian dollar buys 71.4 US cents, using the Bank of Canada’s daily exchange rate. No single session was dramatic. The run was relentless: 1.3784, 1.3798, 1.3822, 1.3866, 1.3909, 1.3917, 1.3947, 1.3988, 1.4002.
Eight sessions, and how rare that is
The run covers September 9 through September 18 and amounts to a 1.58% move in the pair from its September 8 close. On the week the loonie finished 0.98% weaker, from 1.3866 the previous Friday. Ranked against all 36 Friday-to-Friday moves so far in 2026, that is the fourth-largest weekly decline of the year, behind June 19 at 1.39%, January 9 at 1.16% and March 27 at 1.14%. Year to date the currency has weakened 1.93%, from 1.3737 on January 2.
Computed from the full Valet series back to January 1, 2024, streaks of eight or more consecutive sessions have happened five times: July 17 to 29 in 2024, October 2 to 15 in 2024, October 22 to November 1 in 2024, December 24 through January 9 this year, and this one. So it is the longest stretch since the nine-session run that ended January 9, and one of only five in nearly three years. Not a record. But a persistent one-directional drift usually has a mechanism behind it.
The week in numbers
Data as of the September 18, 2026 close.
| Market | Friday September 18 | Week over week |
|---|---|---|
| S&P/TSX Composite | 35,806.65 | +0.31% |
| S&P 500 | 7,650.50 | -0.08% |
| NASDAQ Composite | 26,522.54 | +0.72% |
| WTI crude (settlement) | $95.66 USD | -4.4% |
| Gold (settlement) | $4,415.50 USD | +0.15% |
| USD/CAD | 1.4002 | +0.98% (loonie weaker) |
The TSX was quietly positive on the week despite slipping 0.19% on Friday, and Bitcoin rose 4.8% to $80,901 USD. Friday’s TSX Composite volume of 628,419,000 shares against a Monday-to-Thursday average of 251,828,300, roughly 2.5 times normal on Yahoo Finance data, reflects the September quarterly options and futures expiry on the third Friday. Read nothing more into it than that.
The Bank of Japan raised rates into an oil shock
The new development of the week came out of Tokyo on Friday. The Bank of Japan’s Policy Board voted 7-2 to “encourage the uncollateralized overnight call rate to remain at around 1.25 percent”, up from around 1.0%, effective September 24. The complementary deposit facility rate moves to 1.25% and the basic loan rate to 1.5%. Governor Ueda Kazuo’s board also kept the door open, saying the Bank “will continue to raise the policy interest rate and adjust the degree of monetary accommodation”.
Two members dissented against the hike. Asada Toichiro argued that with CPI less fresh food below 2%, “it could not necessarily be said that the economic situation was strong”. Sato Ayano argued that conditions “did not appear to have substantially accelerated”.
The part that should interest a Canadian reader is what the Bank named as the pressure it was acting on. In the September 18 decision document, it attributes high producer price inflation to “the impact of the expansion in AI-related demand, in addition to high crude oil prices and the depreciation of the yen”, and lists “the situation in the Middle East” first among its risks. That is the same crude shock running through Canada’s own CPI. Japan raised rates into it. Canada has not.
The Fed moved first. The Bank of Canada has not moved at all.
The US Federal Reserve raised its target range a quarter point to 3.75% to 4.00% on September 16, on a 12-0 vote, writing in its statement that “Inflation remains elevated. Today’s policy action will support a timelier return to the Committee’s 2 percent goal.” The projections published alongside it are the more consequential half of that decision, and we went through them the following day in our coverage of the Fed’s hike and its revised rate projections.
The Bank of Canada’s policy rate is 2.25% and has been since October 30, 2025, roughly eleven months on hold, and the last move was a cut from 2.50%. Computed from the Bank’s own policy rate series, its last increase was July 13, 2023, from 4.75% to 5.00%. A hike at the next meeting would be its first in more than three years.
The mechanism: the two-year spread
Currency moves are easier to assert than to explain, so here is the cleanest number available, on matched dates. Canada’s two-year government bond yield was 3.35% on September 11 and 3.27% on September 17. The US Treasury two-year par yield was 4.63% on September 11 and 4.67% on September 17.
The US-Canada two-year gap therefore widened from 128 basis points to 140 in four sessions. The Canadian figure stops at September 17 because the Bank of Canada’s Valet series publishes with a one-business-day lag, so Friday’s Canadian yield was not yet available. The US side was: the two-year added a further 9 basis points on Friday, to 4.76%. Ten-year yields moved the same way, Canada from 3.95% to 3.83% across those same two dates, the US from 4.96% on September 11 to 5.01% on Friday.
The direction is the whole point. US short yields rose and Canadian short yields fell in the same week. Canada’s two-year fell as August CPI landed benign on the Bank’s own core measures. America’s rose as the Fed hiked and raised its own projected path.
One caveat, and it is not a formality. A currency has many drivers and no single number explains a move. Two pressures are identifiable this week and both point the same way. That is as far as the evidence goes.
The second pressure: crude round-tripped ten dollars
WTI settled at $100.05 USD on Friday September 11, ran to $105.83 USD on Tuesday September 15, then settled at $95.66 USD on Friday September 18, on Saudi Arabia restoring East-West pipeline capacity after drone strikes. That is 4.4% lower on the week and 9.6% below Tuesday’s settle. The Canadian dollar is a petro-currency, so a 4.4% weekly fall in crude and a widening rate gap lean the same way. That is a correlation worth naming, not a measured cause.
Canadian energy equities barely registered it. An iShares fund tracking the capped TSX energy sector, a reasonable proxy for the group, rose 0.45% on the week, from $28.88 to $29.01. A reader watching crude travel ten dollars in four sessions for almost nothing in the equities will want to know which producers hold up at a lower price, which our page on Canadian energy stocks works through.
What a weaker loonie does to a Canadian portfolio
Mechanically, a weaker Canadian dollar raises the Canadian-dollar value of unhedged US and foreign holdings and lowers it for anyone holding a currency-hedged version of the same exposure. That is not a recommendation, it is the trade-off, and this week made it live rather than theoretical. A Canadian who wants a large US name faces exactly that choice, between buying the US listing directly and buying the CAD-hedged Canadian Depositary Receipt, which is the currency decision we work through on our page covering how to buy Tesla stock in Canada.
There is a second channel, into prices. Gasoline was up 22.8% year over year in Statistics Canada’s August CPI, with inflation excluding gasoline at 2.4% against a 3.0% headline. A weaker currency makes every US-dollar-priced import more expensive in Canadian dollars, crude included, feeding the same index the Bank is watching. Rate-sensitive assets behaved accordingly: real estate was the weakest of the eight TSX sectors on the week at -1.53%, against utilities at +1.12% and financials at +0.84%.
What to watch into October 28
Both central banks decide on the same day. The Bank of Canada announces on October 28 with a Monetary Policy Report, and the Federal Open Market Committee meets October 27 and 28, with its statement at 2:00pm ET. Going in, one-month CORRA futures on the Montreal Exchange price 13.56 basis points of tightening for the Canadian meeting, an implied rate of 2.39% against the 2.25% target, or about a 54% chance of a quarter-point hike. Spot CORRA sits at 2.29%.
None of this forecasts where the currency goes. But the arithmetic of the spread is not mysterious. For the gap to stop widening, one of two things has to change: Canadian short yields have to rise, which requires the market to price more Bank of Canada tightening than a coin flip, or US short yields have to fall. October 28 is the day both sides of that get tested at once.
Disclaimer: The content on bestcanadianstocks.ca is for informational and entertainment purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions. Exchange rate, policy rate and Canadian bond yields from Bank of Canada Valet series (FXUSDCAD, V39079, BD.CDN.2YR.DQ.YLD, BD.CDN.10YR.DQ.YLD). US yields from the US Treasury daily par yield curve. Market and commodity data as of the September 18, 2026 close. Bank of Canada rate pricing derived from Montreal Exchange one-month CORRA futures settlements on September 18, 2026. Bank of Japan and Federal Reserve figures from each institution’s own decision documents.
