The Canadian Dollar strengthens on rising crude prices and softer USD amid Fed rate hike expectations and Middle East tensions.
USD/CAD dropped to around 1.3800 in Asian trading Thursday, extending losses for a second day. The decline follows a surge in crude oil prices, bolstering the commodity-linked Canadian Dollar amid escalating Middle East tensions and stalled U.S.-Iran negotiations.
Brent crude’s risk premium remains elevated as market participants price in potential supply disruptions. TD Securities noted the Iran conflict could escalate further, keeping oil prices supported. Meanwhile, the U.S. Dollar weakened after Fed minutes showed officials favored a near-term rate hike if inflation persists, though recent data suggests easing price pressures.
The Fed held rates steady at 3.5%–3.75% in July but signaled readiness to act if inflation fails to cool toward the 2% target. The pair’s decline reflects shifting expectations for Fed policy and geopolitical risks.