US Dollar Strengthens as Canada's Commodity-Linked Currency Takes a Hit

The Canadian Dollar has weakened as the US Dollar strengthens on rising risk aversion. The recent attack by Iran-backed Houthi militants in Yemen on Saudi Arabia's Jazan refinery, and a tanker operated by Abu Dhabi National Oil Co., have heightened tensions in the region.

On the economic front, US Nonfarm Payrolls (NFP) unexpectedly dropped by 23,000 in July, while sharp downward revisions to June's figures fell to 20,000 from an initially reported 57,000. This has led markets to see a nearly 44% probability of a 25-basis-point rate hike in September, down from 67% a week earlier.

Despite the tailwinds for the US Dollar, upside potential for the USD/CAD pair could be restrained by support for the commodity-linked Canadian Dollar. Oil prices have rebounded with West Texas Intermediate trading around $77.20 per barrel as it pares losses from the previous session.