The market bias for the CAD to JPY exchange rate is currently bearish.
Key drivers include:
- Interest rate differentials are impacting the CAD, particularly as the Bank of Canada maintains its rate at 2.25%, while the Bank of Japan has recently increased its rate to 0.75%.
- The Canadian economy shows signs of weakness with the manufacturing sector contracting and oil prices declining, which affects the CAD’s strength.
- Japan's recent increase in business sentiment and a sizable defense budget could bolster the JPY against the CAD.
In the near term, the CAD to JPY is expected to trade within a stable range, reflecting its recent performance above average levels. Upside risks could arise from a rebound in oil prices, while downside risks may materialize if U.S. economic data significantly weakens, potentially pushing the USD higher against both currencies.