Weekly Currency Update: Canadian Dollar Forecast This Week

The US dollar stayed firmly in demand through the week as investors continued to favour liquidity and safety while Middle East tensions kept energy markets on edge. Support for the greenback was reinforced by rising Treasury yields and a sharp shift in Fed expectations, with markets increasingly treating the United States as relatively better insulated than many other economies from the latest oil shock. By week’s end, the dollar was heading for its strongest monthly gain since July 2025.

The Canadian dollar traded in a choppy but broadly resilient fashion, with the loonie caught between softer oil early in the week and renewed strength in crude later on. It briefly recovered from a two-month low when broader risk sentiment improved, but gains were limited as concerns about weak domestic growth, falling exports and prior job losses weighed on confidence. Even so, Canada’s commodity profile continued to give the currency a measure of support relative to many energy-importing peers.

The euro remained under pressure as investors focused on Europe’s exposure to higher energy prices and the inflation-growth tradeoff now confronting the euro area. While ECB officials pushed back against the idea of rushing into tighter policy, markets still moved to price a more hawkish path, underscoring how sharply the oil shock has changed the backdrop. That left the single currency squeezed between a fragile regional outlook and persistent dollar strength.

Sterling came under renewed pressure against the dollar, though it still held up better than several other European currencies over the broader conflict period. The pound was weighed down by safe-haven demand for the US dollar and by concerns that higher borrowing costs, fragile public finances and the UK’s exposure to imported energy could eventually erode its relative resilience. At the same time, a shift toward expectations of further Bank of England tightening helped prevent a deeper slide.

The Japanese yen remained on the defensive as rising oil prices continued to expose Japan’s vulnerability as a major energy importer. Even with domestic bond yields rising and intervention rhetoric returning, the currency struggled to attract sustained support while the dollar dominated safe-haven flows. By the end of the week, official concern had become more visible, with Tokyo warning it stood ready to respond decisively to oil-driven speculative moves in the FX market.

The Swiss franc stayed firm, supported by steady safe-haven demand as geopolitical tensions remained elevated. However, the currency’s upside was moderated by the Swiss National Bank’s increasingly explicit readiness to intervene if franc strength tightens monetary conditions too much. That left the franc supported in principle, but with markets also mindful that Swiss policymakers are uncomfortable with excessive appreciation.

The Chinese yuan traded with a softer tone as broader dollar strength and a cautious global backdrop kept pressure on regional and emerging-market currencies. Beijing’s longer-term efforts to expand the renminbi’s role in payments remained in view, but near-term trading was still dominated by external stress, rising yields and a market preference for dollars over cyclical Asian currencies. The broader retreat from Asian assets added to that headwind.

The Indian rupee endured another bruising week, sliding to fresh record lows as soaring oil prices intensified pressure on India’s current account, inflation outlook and growth prospects. Persistent foreign outflows and firm dollar demand compounded the move, while RBI intervention appeared aimed more at smoothing volatility than reversing direction. Among major Asian currencies, the rupee remained one of the clearest casualties of the energy shock.

The Australian dollar struggled to build momentum and was among the currencies hurt by the renewed rush into the US dollar. Although Australia is not in the same position as major energy importers, the Aussie still behaved like a risk-sensitive currency as investors turned more defensive and oil-driven inflation fears unsettled global markets. By late in the week, it had fallen to a two-month low against the greenback.

The New Zealand dollar remained vulnerable in the broader risk-off environment, with the kiwi continuing to trade as a high-beta currency rather than a defensive one. Regional policy support measures and fuel contingency planning highlighted how seriously authorities were taking the economic fallout from the energy shock, but they did little to shift market sentiment. As a result, the kiwi stayed pressured by the same global forces weighing on cyclical currencies more broadly.

The Mexican peso was steadier than some emerging-market peers, but it still traded under the shadow of tighter global financial conditions and stronger dollar demand. Mexico’s status as an oil producer offered some offset, yet that support was tempered by the wider pullback in emerging-market debt and risk appetite as war-related volatility pushed up borrowing costs and drove investors toward safer assets.