The Canadian dollar rose 1.9% in October, likely to post its best monthly performance since April.

The Canadian dollar is likely to record its best monthly performance since April this year, following the Bank of Canada's announcement of an interest rate hike. Supported by persistently high oil prices combined with the Bank of Canada's shift toward tighter monetary policy, the Canadian dollar is expected to secure its largest monthly gain since April. On Thursday, the Canadian dollar rose as much as 0.2% against the US dollar during intraday trading, reaching its highest level in over a month. The total gain for all of October has already reached 1.9%.The Canadian dollar is a typical commodity-linked currency; last week, voters in Alberta, Canada, rejected a proposal to secede from the country, which directly alleviated political uncertainty in this core oil-producing province and provided positive support for the Canadian dollar.Andrew Hazlett, a foreign exchange trader at Monex Inc, pointed out that the Canadian dollar also received additional support from yesterday's rate hike by the Bank of Canada. Meanwhile, as one of the world's major oil exporters, persistently high oil prices have also provided fundamental support for the currency.Sarah Ying, Head of FX Strategy at CIBC Capital Markets, stated that although the rate hike was largely anticipated by the market, the Bank of Canada's disclosed inflation expectations were more hawkish than previously forecast, signaling that further rate hikes could still be possible. The Bank of Canada now projects average inflation to be 3.1% by 2027, compared to the previous forecast of 2%. It also expects annual inflation to only return to the 2% policy target by mid-2028.Sarah Ying believes that compared to central banks in other major economies, the Bank of Canada is still at a relatively early stage of this rate-hike cycle, meaning the Canadian dollar still has momentum for further strengthening.