The Canadian dollar strengthened toward 1.38 per US dollar as the greenback retreated, following President Trump’s decision to delay infrastructure strikes for two weeks under a conditional ceasefire. The resulting relief rally was driven in part by a sharp drop in WTI crude prices after Iran agreed to reopen the Strait of Hormuz for a two-week period to allow for negotiations.
Although lower energy prices would typically weigh on the loonie, the broader decline in the US dollar index to a four-week low has ultimately supported the Canadian currency. Investors are now reassessing the domestic outlook as the immediate risk of energy-driven stagflation eases. Even so, the loonie continues to lag currencies such as the Australian dollar and the British pound, which are less exposed to the petroleum sector.
At the same time, falling US Treasury yields have further eroded the greenback’s carry advantage, even as markets remain cautious ahead of Friday’s US inflation release.
