USD/CAD Climbs to 1.4070 as Oil Prices and Geopolitics Weigh on Loonie

The USD/CAD exchange rate rose to about 1.4070 on Tuesday, driven by weakness in the Canadian dollar. The decline in oil prices outweighed firmer risk appetite, with West Texas Intermediate dropping 0.46% to $91.20.

This development weighed heavily on the loonie, given Canada's significant role as an oil producer and exporter. A separate factor contributing to the USD/CAD pair's bias towards a higher US dollar was easing geopolitical tension following renewed prospects for talks over the Strait of Hormuz.

Boston Fed President Susan Collins backed last week's rate rise, stating that upside inflation risks have increased due to stronger labour market conditions. This stance is consistent with a more restrictive monetary policy approach to return inflation to the Federal Reserve's 2% target.