Canadian Dollar Nears Recent High Amid Oil Price Surge

TORONTO: The Canadian dollar strengthened on Thursday, edging closer to its highest level in five months against the US dollar. This movement coincided with rising oil prices and occurred a day after the Bank of Canada (BoC) decided to hold off on further interest rate reductions.

The loonie experienced a gain of 0.1%, trading at 1.3845 per US dollar, equivalent to 72.23 US cents. Notably, on Monday, it reached its strongest point since November 6, hitting 1.3827. The Canadian dollar has appreciated by 0.1% this week, marking its seventh consecutive week of gains – a streak not seen since May 2021.

According to Marc Chandler, chief market strategist at Bannockburn Global Forex, the Canadian currency has benefited from the widespread weakening of the US dollar.

The US dollar experienced a three-year low against a basket of major currencies last week, influenced by concerns regarding the economic consequences of tariffs and investors shifting their assets outside the United States.

Chandler noted, “The 200-day moving average is just above 1.40, so that’s likely the upper limit for USD-CAD. We might test that level, but the next significant shift will likely be downward.”

The price of oil, a primary export for Canada, saw a 3.5% increase, reaching $64.63 a barrel. This surge was triggered by the US imposing new sanctions aimed at limiting Iranian oil exports, which in turn heightened concerns about supply.

On Wednesday, the Bank of Canada maintained its benchmark interest rate at 2.75%, marking a pause after seven successive rate cuts. The central bank cited uncertainties surrounding US tariffs as a reason for not issuing standard economic projections.

Despite existing trade tensions between Canada and the United States, Canadian investors purchased a record volume of American shares in February, coinciding with US stock markets reaching record highs.