07:05 AM EST, 11/15/2024 (MT Newswires) -- The Canadian dollar (CAD or loonie) has pushed well past the $1.40/USD boundary (71.4 cents), to a four-year low, and seems to be on a one-way trip weaker, said Bank of Montreal )(BMO).

Wide Canada/United States rate differentials, including a record spread at the 10-year area of -115 bps, are compounding a generalized weakening against an ascendant US dollar (USD), noted the bank.

Yet, so far, the Bank of Cnada seems blissfully unperturbed, stated BMO. At a recent testimony, Governor Tiff Macklem said concerns about a falling currency "are not factoring into our current monetary policy decisions."

This 'loonie-faire' policy stance may be driven by the view that the currency is no big deal for the inflation outlook. The bank begged to differ.

It's true the loonie doesn't drive inflation quite to the same extent as in decades before but there is still a very strong correlation between moves in the currency and Canada's relative inflation rate versus the US, added BMO. Roughly speaking, a 10% rise in the cost of the USD will lift relative Canadian inflation by 1 ppt.

Given the BoC's lack of concern and the recent upswing in the USD, Canada may be soon testing that relationship.

Governor Macklem may not be interested in the Canadian dollar, but the loonie is interested in him, according to BMO.