Why is the Canadian dollar weakening against the US dollar despite strong oil prices? Strategist DiegoColman de-codes recent market movements.
The recent risk-averse tone and extreme levels of volatility on account ofhave generated a strong bid for safe haven assets, leading traders to dump high-beta currencies. The following chart, which overlaysperfect negative correlation between the two assets since the start of the war in UkraineSource:
Given that negative sentiment has been the main bearish catalyst for the Canadian dollar, it is reasonable to argue that the trend could quickly reverse once the situation improves andequities stop the bleeding, allowing the currency to align with its solid fundamentals. With China suggesting that the government could begin dismantling the Shanghai, the extreme state of pessimism could begin to ease, paving the way for risk assets to stabilize.well-placed to command strength against the U.S.
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