Weekly Currency Update: Canadian Dollar Forecast This Week

The US dollar fell sharply over the week, marking one of its weakest performances in several months as confidence in the greenback deteriorated across global FX markets. Broad USD selling accelerated amid heightened geopolitical tensions, tariff-related uncertainty, and unease around US policy direction, which eroded the dollar’s traditional safe-haven appeal and drove investors toward alternatives such as gold and select non-USD currencies. The pullback was widespread, with DXY sliding close to 2% on the week, reflecting reduced demand for US assets and softer positioning ahead of key Federal Reserve decisions. While the dollar weakened broadly, moves were uneven across emerging markets, underscoring spillover risk rather than uniform risk-on behaviour. Overall, USD sentiment turned decisively bearish, with markets reassessing US credibility and pricing greater vulnerability to political and macro shocks unless upcoming Fed guidance or inflation data restores confidence.

The Canadian dollar strengthened decisively against the US dollar, emerging as one of the strongest G10 performers as broad USD weakness dominated FX markets. USD/CAD trended lower through the week, marking the loonie’s biggest weekly gain since May, with CAD supported by a combination of softer US dollar sentiment, upbeat Canadian retail sales that exceeded expectations, and modest gains in oil prices, Canada’s key export. Improved risk appetite and a rotation out of the US dollar amid geopolitical and policy uncertainty further amplified CAD gains, allowing the currency to outperform despite an unchanged Bank of Canada policy backdrop. Overall, the loonie benefited from favourable domestic data, commodity support, and global USD selling, leaving CAD with clear momentum heading into the next week, provided the US dollar remains under pressure and oil prices stay firm.

The euro strengthened against the US dollar, benefiting from a sharp and broad-based USD sell-off that lifted most major currencies. EUR moved higher over the week, finishing well above where it started as investors rotated away from the dollar amid geopolitical uncertainty, tariff-related headlines, and fading confidence in the USD’s safe-haven appeal. A steadier euro-zone macro backdrop, including business activity remaining in expansion territory, helped the euro hold gains even as growth momentum stayed modest. With the US dollar posting one of its weakest weekly performances in months, EUR/USD advanced toward the upper end of its recent range, leaving the euro supported heading into the next week, though further upside will depend on US inflation data and Federal Reserve signals.

Sterling strengthened sharply against the US dollar, delivering its best weekly performance since August as a broad USD sell-off combined with encouraging UK economic data. GBP/USD climbed steadily through the week, supported by stronger-than-expected UK retail sales and improving business activity, which reinforced confidence in the domestic outlook and helped the pound outperform many peers. At the same time, geopolitical uncertainty and policy noise out of the US weighed on the dollar’s safe-haven appeal, amplifying GBP gains. By week’s end, the pound was firmly higher versus the dollar, with momentum driven more by USD weakness and UK resilience than by any shift in Bank of England policy expectations.

The Japanese yen strengthened notably against the US dollar, ending the week firmer as USD/JPY fell from the upper-158 area toward roughly 155–156 by Friday, marking one of the yen’s strongest weekly performances in months. The move was driven primarily by broad US dollar weakness, which weighed on USD/JPY throughout the week, and was amplified late in the period by renewed speculation over possible Japanese FX intervention, after market chatter around a US rate check triggered aggressive short-yen covering. While the Bank of Japan kept policy unchanged earlier in the week, initially a headwind for the yen, intervention risk and positioning dynamics overtook monetary policy as the dominant drivers, producing a sharp late-week yen rally. Overall, the yen benefited from a softer dollar backdrop, heightened sensitivity to FX policy signals, and reduced tolerance for excessive USD/JPY levels near multi-month highs.

The Swiss franc strengthened meaningfully against the US dollar, with USD/CHF falling roughly 1.8–2.0% over the week, reflecting one of CHF’s stronger weekly performances in recent months. The move was driven primarily by broad US dollar weakness, as geopolitical uncertainty and policy-related concerns reduced confidence in the dollar’s safe-haven role, while risk-off sentiment boosted demand for traditional havens such as the franc and gold. CHF gains were further underpinned by stable Swiss National Bank positioning, with SNB officials emphasizing policy credibility and independence, reinforcing the franc’s defensive appeal at a time of heightened global uncertainty. Overall, CHF benefited from a combination of USD selling pressure, renewed safe-haven flows, and Switzerland’s reputation for monetary and political stability, allowing the franc to outperform the dollar decisively by the end of the week.

The Chinese yuan held mildly firmer to stable against the US dollar, with USD/CNY confined to a tight range and showing a slight downward bias, reflecting modest yuan appreciation during the week. The move was supported by broad USD weakness, which eased external pressure on the currency, alongside continued guidance from the PBoC, whose reference fixings signaled tolerance for gradual yuan strength. Seasonal exporter conversions ahead of the Lunar New Year added incremental yuan demand, reinforcing stability, while the broader macro and geopolitical backdrop encouraged orderly FX flows rather than volatility. Overall, CNY gains were contained and controlled rather than aggressive, with the currency benefiting from a softer dollar environment, supportive central-bank signaling, and steady corporate flows that kept USD/CNY range-bound with a mild strengthening tilt.

The Indian rupee weakened sharply against USD, sliding to fresh record lows as persistent dollar demand from corporates and importers combined with ongoing portfolio outflows to keep pressure firmly on the currency. INR declined steadily through the week, marking a clear depreciation trend for INR. Brief periods of dollar softness early on failed to provide lasting relief, as importer buying quickly re-emerged and reversed any gains. While the Reserve Bank of India announced liquidity injections and FX swap operations to ease market stress, these measures mainly helped smooth volatility rather than reverse direction. Overall, the rupee’s performance reflected structural flow pressures, capital outflows, and elevated demand for dollars, leaving INR vulnerable near historic lows despite central bank support.

The Australian dollar strengthened sharply, climbing toward 15-month highs as a combination of broad USD weakness, strong domestic data, and improved risk sentiment lifted demand for the Aussie. The rally was underpinned by surprisingly strong Australian labour-market data, which reinforced expectations that the Reserve Bank of Australia may keep policy tighter for longer, boosting AUD yield appeal. At the same time, USD selling, linked to geopolitical uncertainty and shifting global capital flows, favoured higher-beta currencies like AUD. Supportive commodity dynamics, including surging gold prices and steadier iron ore sentiment, further reinforced the move. Overall, the Aussie posted one of its strongest weeks in over a year, reflecting a powerful mix of domestic resilience, USD softness, and renewed risk appetite.

The New Zealand dollar strengthened decisively, posting one of its strongest weekly performances in months as broad USD weakness and supportive domestic data lifted the kiwi. NZD/USD climbed from the low-0.57s toward the mid-0.59s, as risk sentiment improved and investors rotated into higher-beta currencies. A key catalyst was stronger NZ inflation, which surprised to the upside and reduced expectations for near-term rate cuts from the Reserve Bank of New Zealand. At the same time, global sell-USD flows, driven by geopolitical uncertainty and shifting policy confidence in the US, created a favourable backdrop. Overall, NZD benefited from a combination of firm domestic fundamentals, improved risk appetite, and pronounced US dollar softness, allowing it to end the week near its highest levels since late 2025.

The Mexican peso strengthened solidly, continuing to trade near the strongest levels seen so far this year as broad USD weakness and favourable carry dynamics supported MXN. USD/MXN trended lower through the week, moving from the upper-17.60s toward the mid-17.30s, signaling a clear appreciation of the peso. The move was driven primarily by a global pullback in the US dollar, which reduced pressure on emerging-market currencies, alongside Mexico’s relatively high interest-rate advantage, which kept carry flows supportive in a stable risk environment. Improved risk sentiment and steady commodity conditions also helped underpin the peso, allowing it to outperform many peers. Overall, MXN ended the week firmly stronger, benefiting from both external USD weakness and its own yield-supported resilience.