Higher crude prices bolster the CAD, pressuring the pair amid geopolitical tensions in the Strait of Hormuz and Fed rate hike expectations.
USD/CAD declined for a second straight session, trading near 1.4200 in Asian hours Friday. The drop follows a rise in oil prices, supporting the commodity-linked Canadian Dollar as Canada remains a top crude exporter.
Crude prices climbed after a suspected projectile attack on a cargo vessel near Oman disrupted UN evacuation efforts in the Strait of Hormuz. The incident, reportedly involving Iranian forces, heightened supply concerns and triggered warnings over vessel security in the region.
The pair’s downside remains limited as the USD finds support from a 63.4% probability of a Fed rate hike in September, per CME FedWatch. Accelerating inflation, with the PCE Price Index rising to 4.1% in May, fuels hawkish expectations.