Canadian Dollar outperforms major peers amid surging oil prices
- The Canadian Dollar trades broadly firm against its major peers as oil prices have increased significantly.
- Escalating Middle East conflicts have prompted global oil prices.
- The BoC is unlikely to cut interest rates in the near term.
The Canadian Dollar (CAD) trades higher against its major currency peers, but is marginally down to near 1.3735 against the US Dollar (USD) during the European trading session on Monday. The North American currency trades higher as the oil price gains sharply, with conflicts escalating in the Middle East.
Canadian Dollar Price Today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.39% | 0.42% | 0.18% | 0.07% | 1.00% | 0.74% | 0.20% | |
| EUR | -0.39% | 0.03% | -0.18% | -0.32% | 0.73% | 0.34% | -0.19% | |
| GBP | -0.42% | -0.03% | -0.25% | -0.35% | 0.70% | 0.31% | -0.23% | |
| JPY | -0.18% | 0.18% | 0.25% | -0.09% | 0.83% | 0.49% | 0.02% | |
| CAD | -0.07% | 0.32% | 0.35% | 0.09% | 0.91% | 0.54% | 0.09% | |
| AUD | -1.00% | -0.73% | -0.70% | -0.83% | -0.91% | -0.38% | -0.79% | |
| NZD | -0.74% | -0.34% | -0.31% | -0.49% | -0.54% | 0.38% | -0.50% | |
| CHF | -0.20% | 0.19% | 0.23% | -0.02% | -0.09% | 0.79% | 0.50% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
As of writing, WTI Oil price trades 2.7% higher to near $100.15. Brent Oil trades 1.4% higher to near $109.75.
Higher oil prices are favorable for the Canadian Dollar, given that Canada is the largest oil exporter in the world.
Middle East conflicts have escalated as Iran vows to retaliate if military forces from the United States (US) or Israel attack Iran’s power plants. Over the weekend, US President Donald Trump threatened to obliterate Tehran’s power plants if it doesn’t open the Strait of Hormuz within 48 hours.
On the domestic front, the Bank of Canada (BoC) is unlikely to cut interest rates in the near term, as higher oil prices have de-anchored inflation projections.
Meanwhile, the US Dollar (USD) outperforms as Iran conflicts have increased its safe-haven demand. As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.4% higher to near 99.90.
Domestically, investors will focus on the preliminary US S&P Global Purchasing Managers’ Index (PMI) data for March, which will be released on Tuesday.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
