Loonie Gains on Oil Rally Amid Ongoing Trade Tensions

The Canadian dollar, also known as the loonie, strengthened against its U.S. counterpart on Tuesday due to a significant rise in oil prices.

The price of oil surged to multi-month highs following attacks on Saudi energy facilities and growing concerns over tanker traffic through the Strait of Hormuz. As a result, the Canadian currency drew support from this major export.

The loonie's gain was 0.2% higher at C$1.3788 per U.S. dollar, or 72.53 U.S. cents. However, its overall performance was weighed down by last week's Canadian employment data, which showed the economy lost 41,700 jobs in August.

The escalating trade dispute between Canada and the United States also added uncertainty to the loonie's value. Bilateral negotiations stalled, leading to retaliatory tariffs on C$20 billion of U.S. goods.

The Federal Reserve's upcoming decision on monetary policy will be closely watched for clues on interest rates. Markets are expecting a stronger-than-expected inflation reading later this week, which could bolster the U.S. dollar and limit the loonie's gains.