USD to CAD begins the final quarter of 2021 at 1.267 (CAD to USD is at 0.789). That puts it around the middle of the range of where it had been during September when the US dollar traded as high as 1.285 CAD and as low as 1.250 CAD. The most prevalent theme in the FX markets remains the recent strength in the US dollar which has been benefitting from rising yields in anticipation of a pullback in monetary stimulus later this year as well as an overall cautious sentiment in the financial markets. As we have pointed out, that strength has been less pronounced against the Canadian dollar because of strong oil prices which are now trading at or near multi-year highs. As a result, while the US dollar is near its 2021 highs against most other major currencies, it is still about 3 pennies away from its 2021 highs against the Canadian dollar. Preliminary figures released this morning showed strong growth in the Canadian economy in August but even if that growth level is confirmed, the Canadian economy will not have recovered to pre-pandemic levels (see graph above from Statistics Canada).
