USD/CAD: Declines to re-emerge, possibly before year-end – MUFG

The Canadian Dollar weakened in October and was the third worst performing G10 currency across G10. Economists at MUFG Bank analyze Loonie’s outlook.

USD/CAD is now overshooting fair value

Based on our own short-term valuation model incorporating crude oil price and interest rate moves, USD/CAD is now overshooting fair value. This could well persist while the window for US Dollar strength persists but we now see limits to the scale of upside for USD/CAD from here and would expect declines to re-emerge, possibly before year-end. 

A broadening of the Hamas-Israel conflict could see crude oil prices rise further at these higher USD/CAD levels should help support CAD. 

USD/CAD – Q4 2023 1.39 Q1 2024 1.35 Q2 2024 1.33 Q3 2024 1.32