Definition – What does U.S. Dollar Canadian Dollar (USD CAD) mean?
The U.S. dollar Canadian dollar (USD CAD) is a currency pairing whereby the U.S. dollar and the Canadian dollar can be traded against each other. The USD CAD can be thought of as the dollar versus the Canadian dollar (also known as the loonie) – you short the dollar and go long the loonie or short the loonie and go long the dollar. The USD CAD is a popular currency pair, but it isn’t among the top three most traded currency pairs. The USD CAD may also be written as USD/CAD.
ForexTerms explains U.S. Dollar Canadian Dollar (USD CAD)
The USD CAD is most often used as a commodity price play due to the dependence of the Canadian economy on oil and gas prices. Although the United States is also active in oil and gas exploration and development, it has a more diversified economy with huge financial services and technology sectors. When oil prices go up, the Canadian dollar will usually gain on the U.S. dollar and often reaches parity or higher. When oil prices are low, the Canadian dollar tends to lose value against the U.S. dollar. In reality, however, there are more nuances to this relationship – as there are with every currency pair.
