USD/CAD appreciates to near 1.3650 due to a downward correction in Oil prices

USD/CAD edges higher for the second consecutive day, trading around 1.3650 during the Asian hours on Wednesday. The emergence of risk aversion drives investors toward the US Dollar (USD), underpinning the USD/CAD pair.

On Tuesday, the risk-on sentiment turned sour after Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, suggested that a rate hike might still be possible. Kashkari stated, “I don’t think anybody has totally taken rate increases off the table,” and expressed uncertainty about the disinflationary process, predicting only two rate cuts.

The appreciation in the US Treasury yields also supported the Greenback. The US Dollar Index (DXY), which measures the USD against six major currencies, was trading higher around 104.70, with 2-year and 10-year US Treasury yields at 4.96% and 4.54%, respectively, at the time of reporting.

Moreover, the mid-tier US Housing Price Index (MoM) for March was underperforming, with March's number coming in at 0.1% against 1.2% for February, where 0.5% was expected. On Wednesday, New York Fed President John Williams is scheduled to speak, and the Fed's Beige Book will be released, providing an overview of the current US economic situation based on interviews with key business contacts, economists, market experts, and other sources from the 12 Federal Reserve Districts.

On Loonie’s front, the downward correction in the crude Oil prices put pressure on the commodity-linked Canadian Dollar (CAD), given the fact that Canada is the largest Oil exporter to the biggest Oil consumer United States (US).

Canada’s Industrial Product Price rose by 1.5% month-over-month in April, above market forecasts of 0.6% to reach a fresh 8-month high, and up from an upwardly revised 0.9% uptick in March. The Raw Materials Price Index increased 5.5% month-over-month in April, compared to the previous rise of 4.3% and above the expected increase of 3.2%.