The Canadian dollar (CAD) has experienced recent strength against the New Taiwan dollar (TWD), trading at 90-day highs near 22.20, which is 2.6% above its three-month average of 21.63. This upward momentum can be attributed to various factors, including rising oil prices and shifts in interest rate expectations.
Analysts note that the CAD tends to move closely with oil prices, given Canada’s status as a major oil exporter. Currently, oil prices are trading at $68.05 per barrel, which is 1.0% below the three-month average of $68.76, amidst a volatile trading range of 25.6% from $62.78 to $78.85. Future movements in oil prices will likely continue to heavily influence the CAD.
Recent developments in Canada, particularly a slowdown in inflation to 1.7% in July, have boosted market expectations of a potential interest rate cut by the Bank of Canada (BoC). This speculation, with a rate cut probability rising to 70% for the October meeting, introduces an additional layer of uncertainty. Furthermore, trade tensions with the U.S. following increased tariffs on Canadian goods have added pressure on Canada’s economic outlook.
In contrast, the TWD has shown a significant appreciation this year, rising over 10%, which has prompted Taiwan's central bank to enforce capital controls to manage currency inflows. Despite easing domestic inflation, ongoing trade issues and new U.S. tariffs have raised concerns regarding Taiwan's economic prospects.
Currency experts suggest that while the CAD could show strength due to its links to oil and the potential rate adjustments by the BoC, the TWD may face headwinds as it grapples with international trade dynamics, capital control measures, and the potential for currency revaluation discussions amidst global economic pressures. The interplay between these currencies remains complex and will depend on forthcoming economic data and geopolitical developments.
