Canadian Dollar: Tariffs boost role as funding currency – TD Securities
TD Securities argues Canadian Dollar (CAD) is set to gain prominence as a global carry funding currency, with its carry/vol profile already comparable to Japanese Yen (JPY).
TD Securities predicts the Canadian Dollar (CAD) will become a more prominent global carry funding currency, with its carry/vol profile similar to that of the Japanese Yen (JPY). The USD/CAD exchange rate has climbed to their 2026 year-end forecast of 1.39 following new US tariffs, indicating more potential upside versus fair value.
The team believes further bearish catalysts will arise as the effects of these tariffs on sentiment and production surface in domestic economic data and markets discount the Bank of Canada's hawkish narrative. Following the July JPY intervention, the FX market has been increasingly turning to the CHF as a potential carry funding candidate; however, the CAD's role could garner more prominence if the gold price remains supported and the EU-SZ rate differential stays stable.
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