Canadian Dollar Edges Higher Amid Oil Price Decline

The Canadian dollar experienced a modest increase on Tuesday as the US dollar softened against it. This shift occurred despite oil prices falling sharply after Iran offered to reopen the Strait of Hormuz within seven days if the United States eases military pressure and lifts its blockade on Iranian ports.

Brent crude plummeted to around $98 a barrel, while WTI declined in price as well. Lower oil prices can have a dual effect on the Canadian dollar: they may weigh it down due to Canada's significant energy-export exposure, but also reduce inflationary pressure that has complicated central banks' outlook.

The loonie remains near recent lows after steadily weakening through September, according to Bank of Canada data. The currency is being pulled in opposite directions by monetary-policy expectations: the Federal Reserve's hawkish stance supports the US dollar, while Bank of Canada Governor Tiff Macklem has warned that persistently high energy prices could push Canadian inflation higher.