The Canadian Dollar strengthened as oil prices extended their advance and renewed pressure on the US Dollar pushed USD/CAD towards fresh August lows.
The Canadian Dollar gained further ground on Thursday, with firmer crude prices and a softer US currency reinforcing a move that has gathered pace over the past week.
The US Dollar to Canadian Dollar (USD/CAD) exchange rate traded around 1.3776, down 0.25% on the day and 1.09% lower over five sessions.
WTI crude was also up more than 1% near $85.58 a barrel as the Strait of Hormuz standoff kept supply risks elevated.
Oil Prices and Fed Expectations Support the Loonie
The Canadian currency has benefited from the combination of higher energy prices and fading expectations that the Federal Reserve will deliver another near-term rate increase.
Reuters market commentary highlighted both themes as supportive for the Loonie, while Wednesday’s US Treasury decision to increase long-dated bond buybacks also pulled US yields lower and weighed on the Dollar.
The move leaves USD/CAD testing an important area around 1.3770 after falling more than 2% over the past month.
ING strategists Chris Turner and Francesco Pesole remain cautiously constructive on the Canadian Dollar, saying that “broader USD weakness can still drive USD/CAD down to 1.38 by year-end.”
MUFG’s latest projections similarly envisage USD/CAD easing from 1.41 in the third quarter towards 1.39 by year-end and 1.36 by the second quarter of 2027.
The immediate Canadian Dollar outlook will remain closely tied to oil and US rate expectations. A sustained break below 1.3770 would strengthen the case for a deeper USD/CAD retreat, while renewed Treasury-yield pressure would threaten the latest gains.
Our currency coverage draws on live market data, official economic releases and published bank research.
