Ella 
USD/CAD fell for the fourth consecutive session in early Asian trading on Tuesday, falling to around 1.3570. USD/CAD is facing challenges from a sharp surge in oil prices, a trend that may be related to the ongoing military conflict in the Gaza Strip.
Although markets in Canada were closed for Thanksgiving on Monday, geopolitical tensions remained, with concerns about the situation in the Middle East causing crude oil prices to rise. This in turn provides support for the Canadian dollar (CAD), which is closely linked to oil prices.
WTI oil prices experienced their sharpest rise in six months, hitting $86.01 a barrel on Monday. However, oil prices were back down to $84.70 at press time on Tuesday.
Despite strong U.S. non-farm payrolls data released on Friday, the U.S. dollar (USD) failed to gain significantly. The reason why the dollar failed to appreciate was that U.S. Treasury yields fell on Monday. As of press time, the 10-year U.S. Treasury yield was 4.64%.
In addition, U.S. Treasury yields fell further after speeches by Federal Reserve officials overnight prompted investors to lower the prospect of further interest rate hikes. Therefore, this development is seen as weighing on the US dollar and acting as a headwind for USD/CAD.
Dallas Fed President Lori Logan said the need to raise the Fed’s funds rate may lessen, while Fed Vice Chairman Philip Jefferson acknowledged the Fed must proceed with caution when raising policy rates further.
The U.S. dollar index extended losses for a fifth day in a row and was trading around 106.00 at press time.
Capital markets have turned positive despite ongoing tensions between Hamas and Israel. This shift dampened the safe-haven appeal of the U.S. dollar, causing downward pressure on USD/CAD.
Investors are likely to focus on the minutes of the Federal Reserve meeting, which will be released on Wednesday. The market is looking forward to the impact of the meeting minutes on expectations for the Fed’s next policy moves, which may affect demand for the dollar.
Traders will keep a close eye on Wednesday’s U.S. core producer price index (PPI) and Thursday’s consumer price index, as these events play an important role in assessing domestic inflation trends and economic conditions.
