FX.co ★ Canadian Dollar Holds Strong

The Canadian dollar strengthened beyond 1.36 per US dollar as surging energy prices and a cooling US labor market reshaped the North American monetary landscape. The currency’s appreciation is being driven primarily by West Texas Intermediate crude, which remains elevated near 85 dollars per barrel following reports of the largest proposed strategic reserve release in the history of the International Energy Agency. The loonie also drew support from the closure of the Strait of Hormuz, which continues to underscore Canada’s role as a secure energy supplier to the United States amid the ongoing conflict with Iran. The Bank of Canada has further underpinned the currency by holding its policy rate steady at 2.25% to counter persistent headline inflation of 2.3% and a tight unemployment rate of 6.5%. In contrast to the Federal Reserve—now under pressure to ease policy after an unexpected loss of 92,000 US jobs weighed on the dollar index—the Bank of Canada’s firm stance provides a relative yield advantage for the Canadian dollar.