The US Dollar strengthened as markets increasingly expect a Federal Reserve rate hike in October, driven by diverging monetary policy outlooks between the Fed and the Bank of Canada. According to FX Street (TD Securities), economists Oscar Munoz and Eli Nir highlighted that officials see further hikes on the horizon.
FX Street (TD Securities) also pointed to strong PCE inflation data, modest gains in ISM Manufacturing, and a softer September Nonfarm Payrolls report with higher unemployment, all reinforcing the Fed’s hawkish stance. Meanwhile, the Canadian Dollar remains supported by higher oil prices but struggles against the widening yield gap favoring the US Dollar, pushing USD/CAD higher.
For Japanese investors, monitoring these North American monetary policy shifts is essential, as they influence FX volatility and cross-asset flows impacting global markets including Japan’s export-driven economy.