According to Bloomberg News, the correlation of the Canadian Dollar with the price of oil is currently .88, meaning there is an 88% of the Canadian Dollar appreciating following an increase in the price of oil. This relationship seems to explain much of the Canadian Dollar’s recent strength; the currency has appreciated against the USD for four consecutive weeks. Hurricane Katrina indirectly provided additional support for the currency, as Canadian oil and gas exporters have benefited from commodity prices, which are expected to remain high in the near-term. On September 7, the Central Bank of Canada is expected to raise interest rates and provide guidance for future rate hikes. Bloomberg News reports:

Stronger growth may prompt the Bank of Canada…to raise its benchmark interest rate more than once this year after keeping it unchanged since [last] October.

Read More: Canada’s Dollar Climbs for Fourth Week in Five on Higher Oil