The Canadian dollar (CAD) has recently faced downward pressure influenced by several key factors. Analysts noted a notable decline in oil prices, which have hit a five-month low at around $65.07 per barrel, reflecting global oversupply concerns and trade tensions between the U.S. and China. As a commodity-linked currency, the CAD is closely tied to oil performance; hence, the recent softness in oil prices has resulted in the CAD trading at 90-day lows near 2.9868 against the Malaysian ringgit (MYR), 1.7% below its three-month average of 3.0399.
Recent economic developments in Canada also add to the bearish sentiment around the loonie. Reports indicated that Canada’s GDP may have entered contraction in September, leading to expectations for further economic strain. The Bank of Canada’s recent interest rate cut to 2.5% reflects these concerns, aiming to stimulate the economy amid a weakening job market.
Conversely, the MYR shows resilience amid a backdrop of steady economic fundamentals in Malaysia. The Malaysian economy maintains a good growth trajectory bolstered by a significant trade surplus of MYR 16.1 billion in August and a cautious approach from the Bank Negara Malaysia, which has kept interest rates steady at 3.00%. This scenario has strengthened investor confidence in the MYR and provided it with a buffer against fluctuations.
Market dynamics suggest that the CAD/MYR exchange rate remains volatile, largely influenced by fluctuations in oil prices, which directly impact the Canadian economy. As the global economic outlook evolves, especially with the U.S. Federal Reserve's hesitation towards aggressive rate hikes potentially weakening the U.S. dollar, analysts remain focused on how these factors can reshape the currency landscape. The future trajectory of the CAD will hinge significantly on oil market trends, the actions of the Bank of Canada, and the broader economic indicators from both countries.
