The Canadian dollar (CAD) is trading little changed against the US dollar (USD) once again, as volatile risk appetite continues to be a headwind for the Loonie, according to a report from Scotiabank. In this article, we will explore the factors impacting the CAD and how it is faring against the USD.
CAD Trading Little Changed Against USD
The CAD has been trading in a narrow range against the USD, with the current exchange rate hovering around 1.25 CAD per USD. The CAD has been little changed against the USD in recent weeks, as the market continues to grapple with volatile risk appetite.
Volatile Risk Appetite Remains a Headwind for the Loonie
Volatile risk appetite has been a major factor impacting the CAD in recent weeks. The Loonie is a commodity currency, meaning its value is closely tied to the prices of commodities like oil and natural gas. When risk appetite is high and global economic growth prospects look positive, demand for commodities tends to increase, which can boost the value of the CAD.
However, when risk appetite is low and uncertainty prevails, demand for commodities tends to decrease, which can weigh on the value of the CAD. This has been the case in recent weeks, as concerns about the spread of the Omicron variant of COVID-19 and its impact on global economic growth have weighed on risk appetite.
Other Factors Impacting the CAD
In addition to volatile risk appetite, there are other factors impacting the CAD as well. One of these factors is the monetary policy stance of the Bank of Canada (BoC). The BoC has been gradually tapering its bond purchases, which has caused some investors to speculate that it may raise interest rates sooner than expected. This has helped to support the CAD to some extent.
Another factor impacting the CAD is the performance of the US economy. The US is Canada’s largest trading partner, so any changes in the US economy can have a significant impact on the CAD. The recent surge in inflation in the US has caused some investors to worry about the potential for higher interest rates, which could weigh on the CAD.
In conclusion, the CAD is trading little changed against the USD due to volatile risk appetite. While the Loonie is a commodity currency that is closely tied to the prices of commodities like oil and natural gas, it is also impacted by other factors such as monetary policy and the performance of the US economy. Investors will be closely watching these factors in the coming weeks to assess the outlook for the CAD.