The USD/CAD currency pair declined on Thursday, trading around 1.3612 and down nearly 0.53% on the day, as renewed weakness in the US Dollar (USD) supported the Canadian Dollar (CAD) [1]. The US Dollar came under pressure amid reports of possible foreign exchange intervention by Japanese authorities to address sustained weakness in the Japanese Yen (JPY). According to Reuters, citing Nikkei and a government source, Japan may have intervened by buying Yen and selling Dollars, though there has been no official confirmation [1]. This follows a sharp drop in USD/JPY, which fell more than 2% after testing the 160 level—a threshold where Japan has previously acted [1].
The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, traded around 98.16, down about 0.80% on the day [1]. On the economic front, the US economy expanded at an annualized rate of 2.0% in the first quarter of 2026, rebounding from 0.5% in the previous quarter but missing market expectations of 2.3%, according to a preliminary estimate [1]. Inflation data was mixed: the Personal Consumption Expenditure (PCE) price index rose 0.7% month-over-month in March, up from 0.4% in February and marking the strongest gain since June 2022, while the core PCE index increased by 0.3% month-over-month, easing slightly from 0.4% in February and matching forecasts [1].
In Canada, Gross Domestic Product (GDP) rose 0.2% month-over-month in February, in line with market expectations and improving from January’s 0.1% [1]. The National Bank of Canada reported that growth was supported by a rebound in manufacturing output, and overall activity suggests the economy is holding up, with first-quarter GDP tracking around a 1.7% annualized pace despite ongoing headwinds such as US tariffs, uncertainty over the renewal of the CUSMA trade agreement, and geopolitical tensions in the Middle East [1].
Geopolitical risks remain elevated, particularly between the United States and Iran. US President Donald Trump stated that the United States will continue its naval blockade of Iran until a nuclear deal is reached and is considering a plan to reopen the Strait of Hormuz with allies to safeguard energy flows while maintaining pressure on Iranian ports [1]. These tensions are keeping oil prices elevated, which in turn provides underlying support to the commodity-linked Canadian Dollar [1].
Looking ahead, traders are expected to closely monitor developments in US-Iran tensions, especially any progress toward reopening the Strait of Hormuz, as these factors continue to influence oil prices and the Canadian Dollar [1].
CONCLUSION
The USD/CAD pair is under pressure due to a weaker US Dollar, possible Japanese FX intervention, and mixed US economic data, while the Canadian Dollar benefits from steady domestic growth and elevated oil prices. Geopolitical tensions, particularly between the US and Iran, remain a key risk factor for markets. Traders are likely to focus on further developments in these areas for future direction.