Canadian Dollar rises as US Dollar declines on fading safe-haven demand

USD/CAD depreciates after two days of gains, trading around 1.3970 during the Asian hours on Monday. The currency pair is under downward pressure as the US Dollar declines broadly, driven by a sharp reduction in market risk aversion. This shift follows major geopolitical breakthroughs indicating that the United States and Iran have agreed on a comprehensive peace deal to end their nearly four-month conflict and fully reopen the strategic Strait of Hormuz.

However, the downside for the USD/CAD pair could be limited because the commodity-linked Canadian Dollar (CAD) may face its own headwinds. As Canada is the largest crude exporter to the US, the CAD is highly sensitive to oil prices, which have plummeted significantly on the back of the de-escalation.

West Texas Intermediate (WTI) crude fell over 4%, trading near $79.60 per barrel following reports from *The New York Times* that US President Trump announced the agreement would ensure the Strait of Hormuz remains "permanently toll-free."

The geopolitical shift gained traction after Bloomberg reported Pakistan Prime Minister Shehbaz Sharif's confirmation that both nations had agreed to an immediate and permanent termination of military operations on all fronts, including Lebanon.

While Iran's National Security Council confirmed the ceasefire, Iranian officials noted that final talks will only commence once the US fulfills its commitments under the memorandum of understanding, emphasizing that the maritime blockade against Iran must end immediately and entirely.