Canadian Dollar Flows Show Early Signs of Recovery Before BoC Decision

The Canadian Dollar is attracting tentative buying interest ahead of the Bank of Canada’s latest policy decision, although the improvement is not yet strong enough to signal a lasting change in trend.

BNY market strategist Geoff Yu said the persistent selling of Canadian Dollar-denominated accounts has started to ease. That shift has allowed modest net purchases of the currency to appear after an extended period of pressure.

The improvement matters because investor positioning had already become deeply negative. According to BNY’s flow data, the Canadian Dollar’s two-month average remains near levels normally associated with intense risk aversion. When positioning becomes this stretched, even a small change in expectations can produce a noticeable currency reaction.

USD/CAD selling offers some support

Much of the recent improvement appears to have come from selling in USD/CAD. In practical terms, Canadian investors are no longer increasing their US Dollar exposure as aggressively as they did in late June.

That may indicate that investors believe some of the bad news surrounding Canada’s economy and interest-rate outlook is already reflected in the exchange rate. It may also create room for Canadian institutions to increase currency hedges on overseas holdings, which would generate additional demand for CAD.

Higher energy prices could provide some support because Canada is a major oil exporter. However, the relationship between crude oil and the Canadian Dollar is not always consistent. Currency flows can be shaped just as strongly by interest-rate expectations, equity-market demand and the broader appetite for risk.

Why the recovery remains fragile

There are still important reasons to remain cautious. Domestic investors continue to sell Canadian assets, while international demand for the country’s equities and other investments remains weak. These conditions can prevent a short-term positioning adjustment from becoming a broader Canadian Dollar recovery.

The Bank of Canada’s communication will therefore be central to the next move. If policymakers sound more concerned about inflation, markets may increase expectations for tighter policy, which could support CAD. A more cautious message focused on weak growth would make it harder for the currency to build on its recent improvement.

For now, the flow picture supports selective exposure rather than a strong directional view. Valuation and positioning have become more favourable, but the Canadian Dollar still needs firmer domestic fundamentals and healthier demand for Canadian assets before the case for a sustained advance becomes convincing.

Source context: BNY analysis by Geoff Yu, reported by FXStreet on July 15, 2026.