USD/CAD United States Dollar / Canadian Dollar

Interesting facts

USD/CAD, also known as the “loonie” for the bird displayed on Canadian currency, is the forex pair representing how many Canadian dollars are equivalent to one US dollar, or “buck.” A close economic relationship between these neighbouring countries means business and tourism are often affected by the USD/CAD exchange rate, while macroeconomic drivers such as interest rates are also capable of impacting the pair’s value.

The USD has traditionally been the stronger currency, although in the aftermath of the Great Recession and the subsequent quantitative easing from the U.S. Federal Reserve, the Canadian dollar soared against the U.S. dollar to trade below parity, eventually reaching 0.95. In fact, almost all the instances of parity have been related to periods of U.S. financial difficulty or high oil prices — sometimes both.

Price drivers

CAD is known as a commodity currency, meaning its strength depends on the value of its exports. A large portion of Canada’s exports to the US are oil shipments, meaning that when the price of oil rises, CAD’s value also rises in relation to USD. While the US also produces crude oil, it imports much more oil than it exports, so rises in the cost of oil will lower the value of USD/CAD. Additionally, the interest rate differential between the Federal Reserve (Fed) and the Bank of Canada (BoC) will affect the value of these currencies when compared to each other.