The Canadian dollar lost ground against the US dollar on Tuesday as lower oil prices and renewed demand for the greenback pushed the USD/CAD exchange rate higher for a second straight session.

Because Canada’s currency is closely linked to the energy sector, the decline in crude oil prices added pressure on the loonie. West Texas Intermediate (WTI) crude slipped to around US$70 per barrel as investors weighed ongoing uncertainty surrounding geopolitical developments in the Middle East and potential risks to global energy supply routes.

Meanwhile, the US dollar gained support from growing expectations that the US Federal Reserve could maintain a tighter monetary policy. Market participants have increased the likelihood of another interest rate hike later this year, with investors now closely watching upcoming US employment data, including this week’s Nonfarm Payrolls (NFP) report, for clues about the Fed’s next move.

Safe-haven demand also continued to benefit the US dollar as tensions in the Middle East remained unresolved. Although US President Donald Trump suggested that new discussions with Iran could begin in Qatar, Iranian officials denied that any negotiations were scheduled, highlighting ongoing diplomatic uncertainty.

Attention also remains focused on the Strait of Hormuz, one of the world’s most important oil shipping routes. Iran has indicated it intends to continue overseeing traffic through the waterway and has suggested transit fees could be introduced after a temporary fee-free period expires. While recent regional clashes briefly disrupted shipping activity, oil tankers have largely continued operating through the strait, helping keep global energy supplies moving.

Overall, weaker oil prices, expectations of higher US interest rates, and persistent geopolitical uncertainty combined to strengthen the US dollar while weighing on the Canadian dollar.