Investing.com — The Canadian dollar strengthened against its U.S. counterpart on Tuesday as the greenback retreated from an 18-month peak, with easing oil prices and U.S. bond yields helping temper concerns over inflation and the outlook for interest rates.
The U.S. dollar/Canadian dollar pair fell 0.16% to C$1.4258, according to Investing.com data. The pair opened at C$1.4280 and traded between C$1.4256 and C$1.4283, putting the Canadian dollar on track for a modest advance in early trading.
The move came as the U.S. dollar weakened alongside Treasury yields and crude prices, while investors assessed the potential for easing geopolitical tensions. Markets were also looking ahead to U.S. inflation data due Wednesday for clues on the Federal Reserve’s next policy steps. Traders had raised the probability of the Fed holding rates steady at its October meeting to 80%, from 51% a month earlier, according to CME FedWatch data.
Oil prices remain an important influence on the Canadian dollar because Canada is a major energy exporter. Lower crude prices can weigh on the loonie by reducing the outlook for export revenues, partly offsetting support from a weaker U.S. dollar.
Investors will continue to watch oil-market developments this week along with U.S. inflation figures and interest-rate expectations for direction. The balance between commodity prices and the relative monetary-policy outlook in Canada and the United States is likely to shape the currency’s near-term performance.
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