DEFINITION of 'USD/CAD (U.S. Dollar/Canadian Dollar)'
The abbreviation for the U.S. dollar and Canadian dollar (USD/CAD) currency pair or cross. The currency pair tells the reader how many Canadian dollars (the quote currency) are needed to purchase one U.S. dollar (the base currency).
Trading the USD/CAD currency pair is also known as trading the "Loonie".
BREAKING DOWN 'USD/CAD (U.S. Dollar/Canadian Dollar)'
The value of the USD/CAD pair is quoted as 1 U.S. dollar per X Canadian dollars. For example, if the pair is trading at 1.50 it means that it takes 1.5 Canadian dollars to buy 1 U.S. dollar.
The USD/CAD is affected by factors that influence the value of the U.S. dollar and/or the Canadian dollar in relation to each other and other currencies. For this reason, the interest rate differential between the Federal Reserve (Fed) and the Bank of Canada (BoC), will affect the value of these currencies when compared to each other. When the Fed intervenes in open market activities to make the U.S. dollar stronger, for example, the value of the USD/CAD cross will increase because it will take more Canadian dollars to purchase the stronger U.S dollar.
The USD/CAD tends to have a negative correlation with the AUD/USD, GBP/USD and the NZD/USD currency pairs because they are quoted in U.S. dollars.