The Canadian dollar strengthened slightly on Friday, with USD/CAD trading near 1.3700 in Asia, as firmer oil prices and cautious risk sentiment kept the pair confined to a narrow range for a fifth straight session. The loonie’s modest gains reflected its close link to energy markets, given Canada’s position as the largest crude supplier to the United States.
Oil steadies near $90 as supply risks linger
West Texas Intermediate crude traded close to $90.00 per barrel, supported by ongoing supply concerns tied to tensions between the United States and Iran. Traders remained focused on planned weekend talks between Washington and Tehran, where negotiators aim to convert a temporary truce into a lasting ceasefire.
The broader backdrop is a two-week ceasefire between the United States and Iran that is due to expire on April 22. The negotiations have reportedly stalled over two key issues: Iran’s uranium enrichment program and control of the Strait of Hormuz, a vital artery for global oil shipments.
Local ceasefire in Lebanon proves fragile
On the ground in Lebanon, the military reported several violations of the ceasefire by Israel shortly after the truce took effect, citing intermittent shelling of multiple southern villages. Authorities in Beirut urged residents not to return to affected areas, warning of continued instability along the border.
US President Donald Trump said on Thursday that Israel and Lebanon had agreed to a 10‑day ceasefire starting at 5 p.m. ET, following calls with Lebanese President Michel Aoun and Israeli Prime Minister Benjamin Netanyahu. Netanyahu has maintained that any permanent peace deal would require the disarmament of Hezbollah and the continuation of an Israeli security zone in southern Lebanon, underscoring how fragile the current calm remains.
Washington–Tehran dialogue dominates risk sentiment
Renewed dialogue between Washington and Tehran is the central focus heading into the weekend. Both sides are seeking to formalize the temporary truce before it expires next week, a step that could significantly influence global risk appetite and the direction of energy prices in the near term.
The White House has struck an optimistic tone, with the president saying the seven‑week conflict was “close to over.” Iranian officials, however, have signaled that key differences remain, creating a headline‑driven environment where asset prices are highly sensitive to any shift in diplomatic signals.
Dollar index supported by safe-haven demand
The US Dollar Index edged higher, supported by safe-haven demand and limited selling pressure on the greenback. Hopes for progress in US–Iran talks have capped downside risks for the dollar, offsetting some of the support typically enjoyed by commodity-linked currencies such as the Canadian dollar.
Even so, the index has hovered around the 98.00 level, below recent peaks, as demand for safe-haven assets has eased on each positive diplomatic update. Analysts note that with a US naval blockade of Iranian ports still in place, the risk of a sudden reversal in sentiment remains elevated.
Oil’s “war premium” unwinds, shaping the loonie’s range
Energy markets have shown the clearest response to the shifting geopolitical backdrop. WTI futures recently slipped toward $93 per barrel, down sharply from highs near $115 in the first quarter of 2026. That earlier surge was widely attributed to a “war premium” of about $20 per barrel, which has largely unwound amid hopes for a diplomatic solution.
For the Canadian dollar, this move has translated into a consolidation phase. Major Canadian banks expect USD/CAD to trade in a 1.37–1.40 range through April, as the loonie balances support from stabilizing crude prices against lingering geopolitical risks.
A broader softening of the US dollar over recent weeks has also provided some tailwind, allowing the Canadian currency to briefly touch its strongest level since March.
Bank of Canada policy adds stability
Domestic monetary policy has offered a measure of stability. The Bank of Canada has kept its policy rate at 2.25% and is widely expected to hold that level for the rest of the year, removing interest rates as a near-term source of volatility for the currency.
Typically, the Canadian dollar reacts most to moves in oil prices, Bank of Canada decisions, inflation trends and trade performance. With rates on hold and Canada’s exports still dominated by crude, shifts in global energy markets and broader risk sentiment are likely to remain the key drivers of the loonie in the weeks ahead.
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