USD/CAD climbs on USD demand oil prices cap losses
The USD/CAD pair saw a slight increase during Wednesday's Asian trading session, retreating from the highest level since April 2025 reached earlier in the week. The pair is currently trading just above 1.4200, up 0.05% for the day, as mixed market cues influence its movement.
The US Dollar is attracting some buyers after Tuesday's dip, supporting the USD/CAD pair. Meanwhile, crude oil prices are recovering from a one-month low due to supply concerns in the Middle East, which bolsters the commodity-linked Canadian Dollar and limits the pair's upside.
Geopolitical tensions are escalating, with the Saudi-backed Yemeni government claiming control over strategic points along the Red Sea coast, while the Iran-backed Houthi group retaliated by attacking key targets in Saudi Arabia. Additionally, Iran has increased attacks in the Strait of Hormuz, maintaining a geopolitical risk premium.
A rise in US bond yields is also boosting demand for the safe-haven US Dollar. The divergent monetary policies of the Bank of Canada (BoC) and the US Federal Reserve (Fed) favor USD/CAD bulls, as the BoC has less reason to raise interest rates due to Canada's weaker economic outlook. Traders are pricing in an 85% chance of a Fed rate hike by year-end, with the FOMC meeting Minutes due later today set to influence USD price dynamics.