Canadian Dollar Gains 0.2% on Oil Rally

Canadian Dollar Gains 0.2% on Oil Rally

The Canadian dollar strengthened against the U.S. dollar on Tuesday, trading 0.2% higher at C$1.3788 per U.S. dollar, equivalent to 72.53 U.S. cents. The loonie moved within a range of 1.3776 to 1.3819 during the session, while the USD/CAD pair was quoted around 1.3802 at 9:37 a.m. ET, down roughly 0.09% for the day.

The currency’s appreciation was underpinned by a sharp rally in crude oil prices, which surged to multi‑month highs after attacks on Saudi energy facilities and heightened concerns about tanker traffic through the Strait of Hormuz. U.S. crude futures were last reported at $92.73 a barrel.

Despite the oil‑driven support, the loonie faced headwinds from divergent labour market data: Canadian employment statistics showed a loss of 41,700 jobs in August, whereas U.S. payrolls increased by 162,000 in the same period. The contrast initially pushed USD/CAD higher as investors reassessed the outlook for the Federal Reserve and the Bank of Canada.

Adding to the uncertainty, Canada escalated its trade dispute with the United States by implementing retaliatory tariffs on C$20 billion worth of U.S. goods after bilateral negotiations stalled. This measure introduces another source of risk for the Canadian economy, which remains heavily dependent on the U.S. market.

Markets are now focused on upcoming U.S. inflation data later in the week, which will provide clues on the Federal Reserve’s September policy decision. A stronger‑than‑expected inflation reading could bolster the U.S. dollar and curb further gains in the loonie, while softer data may reinforce expectations for a more accommodative U.S. monetary stance.