Part 3/9:
The second reason mentioned is what the Bank termed "interest rate divergence." Essentially, this refers to the difference in yield between Canadian and US bonds. Currently, five-year Canadian bonds offer a return of 2.8% compared to 4.3% for their US counterparts. This disparity influences investor behavior, prompting them to favor US bonds and, consequently, diminishing the demand for Canadian dollars.
However, while the Bank of Canada attributes some of this decline to external factors like trade deals, there’s room for skepticism. The internal policies and decisions made by the Bank itself, particularly regarding interest rates, warrant scrutiny.