Oil and currencies: why crude prices move the Canadian dollar

The Canadian dollar is often called a commodity currency, because Canada's export earnings depend heavily on natural resources, especially crude oil. When oil prices move, traders of USD/CAD pay attention.

The trade channel

Canada is the largest source of crude oil imported by the United States, according to the US Energy Information Administration. Higher oil prices raise the value of those exports and the flow of US dollars into Canada. Converting those dollars into Canadian dollars adds demand for the loonie. Lower oil prices shrink that flow.

In USD/CAD terms, that means rising oil prices tend to push the pair down (a stronger Canadian dollar), and falling oil prices tend to push it up.

The inflation and interest rate channel

Oil also feeds into inflation through fuel and transport costs, in Canada and everywhere else. Central banks respond to inflation, so oil prices can influence interest rate expectations. In September 2026 the Bank of Canada noted that higher energy prices had lifted headline inflation to around 3%, while it kept its policy rate at 2.25%.

Why the link isn't fixed

The relationship between oil and the Canadian dollar changes over time:

• Interest rate differentials with the US can dominate for months.
• US–Canada trade relations affect the currency regardless of oil.
• Risk sentiment moves both oil and the loonie at once, so the correlation can reflect a common cause rather than a direct link.
• Which oil price matters: Canadian heavy crude often sells at a discount to US benchmark WTI, and the size of that discount affects producers' income.

Other currencies with an oil link

• Norwegian krone: Norway is a major oil and gas exporter.
• Japanese yen and euro: Japan and the euro area import most of their energy, so high oil prices worsen their trade balances.
• US dollar: the US is both a large producer and a large consumer, which makes the link mixed.

Watching oil as a currency trader

Live prices for Brent and WTI are on FTC's markets pages. Weekly US inventory figures and OPEC+ decisions are on the economic calendar. The current situation is covered in Brent crude trades above $100.